Speaker 1 [00:00:02] Hi, it’s John here. I was recently in Davos, Switzerland for the World Economic Forum. And you may know the forum for its big stage where world leaders speak. But when I think of Davos, I often think of its main street, which is known for much of the year as the promenade. It’s a picturesque, winding road through a valley in the Alps, lined with boutiques and cafes. But for this one week in January, this street is taken over by the crowd. There’s those world leaders and global CEOs who make the news, but there’s also a whole range of entrepreneurs, activists, artists, celebrities and scientists. And there on the promenade, there’s a host of businesses and even nations trying to grab some of that global attention by taking over one of those shops for the week. To Davos regulars, the themes of the promenade have become sometimes a bit of a running joke. A few years ago there were so many blockchain pavilions it was nicknamed Blockchain Boulevard. Last year, I think it was called Crypto Corridor. This year it was hard not to see why it was called AI Avenue. One evening, I stood in front of my house, which was sponsored by a bunch of tech companies. I stared across the street to a range of storefronts with slogans like, let’s get real about AI and who says I can’t be robust and reliable? And there was a slogan that maybe could have been the slogan for Davos 2024; The future is AI, the future is humans. Back in the Congress Center, I spent the week jumping from one AI session to another, listening to scientists and entrepreneurs, CEOs, ethicists and regulators. Bill Gates was there and told us he thinks AI is going to be bigger than the internet. Sam Altman arrived and dropped a bit of a bomb, saying, ChatGPT is going to make us all more uncomfortable. I’ve tried to capture some of the many AI voices that were at Davos, and we’ll share some of them on this episode. Is this a hype cycle? Perhaps another crypto? Will I wipe out millions of jobs. Or will it make all our jobs more interesting and rewarding? The future, as that sign said, maybe AI and human, but it will take all of us to ensure we get the balance right. I’m John Stackhouse, and this is Disruptors, an RBC podcast. AI was definitely the topic of the week at Davos. Every AI session I came across was jammed and even the overflow rooms were turning people away. It just shows the degree of hype there is right now. And today we’re going to get beyond the hype and speak with some of the pioneers and visionaries. Who are doing real work. To help make sense of it all. I’m joined by my colleague and former co-host of Disruptors, Trinh Theresa Do. Theresa, it’s great to have you back on the podcast. Speaker 2 [00:03:00] Hey, John, it’s great to be back. I am excited to dig into the hype versus reality of AI. Speaker 1 [00:03:06] Well, I’m excited to have brought home some really interesting voices, which we’re going to share on today’s pod, starting with Erik Brynjolfsson. He’s a big name in AI, and a decade ago, actually, in 2013, Erik gave a Ted talk on the implications of artificial intelligence that seems to resonate still today. He argued that the key to making AI work was to use it to augment human capabilities, rather than to replace them. Erik is considered a leading voice in AI. He teaches a graduate course at Stanford called the AI awakening. He’s written nine books. He’s testified about AI in front of the U.S. Congress and participated in AI summits at the White House, and plenty of other places. I got to sit with him at dinner one night, and here’s a clip from our conversation. Speaker 3 [00:03:53] When you walk down the street here in Davos, every sign is about AI. I’ve never seen anything like it. A few years ago I’d go to Capitol Hill in Washington or talk to CEOs around the world, and they were sort of interested in AI, but it wasn’t necessarily their top interest. Now they hang on every word. They’ve read my papers in advance before I meet with them. It’s a complete seed change in terms of how seriously they’re taking AI, and the tone here at Davos is just a affirmation of that, that this is the thing that everyone’s focused on right now. And 2024 will be the year that AI gets a body and gets put into action. And it’s not just AI writing funny stories or memos, but AI changing the way companies run businesses, workers do their jobs. And that will start translating into higher productivity, better business performance, and real changes in the economy. So in one study we did they rolled it out in a call center. And within a few months they were getting 14% productivity improvements. Some people 35%. You just don’t see that. And I think it’s simply just a very capable technology compared to some of the other ones. What’s your biggest worry? Well, there’s so many but in 2024. Like everyone, I’m worried that the elections will be polarizing, will be hijacked. There may be billions of bots out there giving customized misinformation or what I call nut picking, which is things that are technically true but are very misleading or misrepresented. And I made the actually superhuman persuasion before it’s superhuman in intelligence, and that’s going to be a very bad combination. Speaker 1 [00:05:23] Theresa, it was so interesting to hear Erik talk about persuasion as well as productivity. In fact, productivity, I think, was the word of the week. But the point about persuasion is also critical, and not just out there in the public square and on social media. As the world moves into a year of elections where there’s going to be a lot of debate around information and disinformation. Companies need to think about this, too. How is AI helping your productivity? But at the same time, is it becoming a persuasion tool that also might need more management? Speaker 2 [00:05:54] Yeah, I think that’s such an interesting point, because the 14 to 35% of productivity enhancements that Erik cites is obviously a big boon to businesses. But when you factor in the risk of misinformation, hallucinations, making sure that the information that the AI generates is correct, what then happens to overall productivity? I’m not really sure. There’s so many more resources and hours that will have to be expended to fact check the AI’s work to detect and flag that misinformation — continuously monitor. So all of that being taken to account, I’m not sure we will yet see the productivity that we want in the near term. I think it’ll take a bit more of a learning curve for corporations to be able to get to the point where, okay, sure, this new technology can be used in the most productive way, but only by everyone kind of getting up to speed on what the risks are and what the benefits are. Speaker 1 [00:06:51] So there’s no free productivity left here, in other words. And in some ways, that’s the way of innovation, right? Trial and error means you spend a lot of time on things that aren’t going to pay off, but you test and learn and you keep developing to get to a better place. I’m interested to hear a lot of people talk about Copilots, which has become a bit of a buzzword in AI circles. So think of AI as your copilot. And that’s an interesting metaphor as well as application, because Copilots allowed pilots to fly longer and farther. So there’s a productivity lift. But flying also requires a lot of on the ground monitoring and governance and surveillance, even to make sure that the pilot and copilot are flying safely. Not sure that that metaphor plays out entirely in every application, but it’s a good reminder that whether we’re flying alone or we have a copilot in whatever we do, that it’s not just us and the machine that there’s others who are going to be involved. Speaker 2 [00:07:47] And then something that you brought up in the past, John, is could we harken back to another moment where technology was set to drastically change corporations and that software in the 70s or 80s? Speaker 1 [00:07:59] Yeah, a lot of AI today is really just enterprise software on steroids. Enterprise software really took off in the 70s and 80s. At the time, there were a lot of predictions that enterprise software would mean the end of all sorts of office jobs. And of course it did. But we have more white collar workers, more people working in offices than we had 50 years ago, and they’re a lot more productive. AI offers the same opportunity, but again, on steroids. It will be at a level and scale far beyond Excel or whatever we’re used to working with. Speaker 2 [00:08:36] Yeah. And then, it will then of course vary on the industry and the ability of workers to actually be able to adapt to those changes. But yeah, huge transformations to come. Speaker 1 [00:08:45] And those transformations are going to require a lot of what techies call product. AI right now has a lot of ambitions, a lot of aspirations, but it hasn’t been turned into that Excel or that outlook product that then gets distributed and applied at scale. And there are few people I know who understand this better than an old Disruptors guest Michelle Zatlyn, a Canadian who is the co-founder of Cloudflare. Cloudflare is an enterprise software application and product that allows companies and governments to protect themselves in the cyber wars. Her company protects 20% of the world’s internet traffic, and blocks an average of 140 billion threats per day. I ran into Michelle at Davos, and here’s what she had to say about what may be on the horizon for the next big tech revolution. Speaker 4 [00:09:37] AI is as big as the invention of electricity and the internet. That’s how big of a deal it is. And that’s why it’s everywhere at Davos. So one thing I’ve learned about AI is right now we have a lot of demos, and I think a lot of people mistake the demo for a product. A year from now, what we’re going to be talking about is holy smokes, building the products are a lot harder using AI than the demos. There’s a lot to understand. Even the way that you build code today is a very deterministic fashion. With AI, it’s a non-deterministic action that’s going to be a shift in how we think, how we work, how we manage. It’s going to be a lot close to the policy side, which everyone’s really thought about. But a year from now, I think we’re going to be talking about, why don’t we have more AI built into products, why aren’t they solving real use cases for businesses yet? And it’s not because there is going away. It’s really, really important. It’s going to take a lot longer. So I guess I’m trying to say we’re at peak hype right now and it’s going to take a little bit longer to bake. But I’m very bullish on and in the long term. Speaker 1 [00:10:28] That’s a great perspective from someone who’s actually built a multi-billion dollar company, a unicorn in the digital space. The point I think Michelle was trying to stress is that while AI may change the world, it’s actually going to require a lot of people, entrepreneurs especially, to do the hard work of creating products that we can all use in our daily lives, in the work that we do, and in the way that we communicate. There’s tremendous opportunity for a lot of companies, and it’ll be interesting to see who comes out this year with the kind of applications that certainly ChatGPT showed can have a really powerful impact on the market. Speaker 2 [00:11:05] Demos are the easy part, and now is the grunt work of actually taking an idea and a vision and scaling it up, building it, testing it, maintaining it, making sure that the users can access it intuitively. And companies have to make sure they have you know, robust data pipelines. They got to refine their models, procuring the right hardware and chips, making sure there’s the right talent and labour. It’s no secret that the pool of AI talent is fairly small and demand is massive. And, on the point of hardware, let’s not forget that the entire global AI industry has a single point of failure in the form of TSMC in Taiwan that could completely upend the industry and grind things to a halt unless we see other manufacturers like Samsung and Intel ramp up to the same degree of volume. All of which to say, there’s so many challenges in the face of building proper AI products. Speaker 1 [00:11:58] It’s a really interesting point you make, Theresa, about market concentration, and there’s a lot of worries right now that the generative AI universe is going to be dominated by the cloud companies. So Amazon, Google, Microsoft, principally, those are the companies that control all the data that we share from our phones or whatever we’re using. When we send it into the cloud. They’ve got a scale to do things with AI that very few others do. So that could lead to even more market concentration. But as we’ve seen through generations of tech disruption, it’s often those incumbents who get disrupted. AI yes, it may end up in the hands of a few and we’ll have that concentration and those single points of failure. But it also could lead to new ecosystems of developers and those products that are going to do things that none of us, including the incumbents, can see at this point in time. Speaker 2 [00:12:53] Yeah, I’d love to see the misfits and rebels of AI, and if they are able to compete with these large language models that the incumbents have. Speaker 1 [00:13:01] Well, it’s going to take a different approach to business and innovation in a lot of places. And that’s a wonderful thing about technology. I got to hear a bit more about this from some people at Capgemini, the big consulting firm. They had the coolest display at Davos, actually, right at the main entrance to the big Congress hall. They had a Peugeot sports car that is powered by AI to change the way that race car drivers drive, but also change the way that all of us drive one day. Capgemini released a report during Davos that states 96% of organizations say generative AI is on their boardroom agenda. Capgemini is doing a lot of work with those big tech giants, whether it’s Google or Microsoft or Salesforce or Oracle, but also working with a lot of entrepreneurs and smaller operators around the world. They have an AI Center of Excellence that is focused on empowering organizations through AI solutions. I met the head of that center, Ashwin Parmar, when I went in to see that race car, and here’s some of what he had to say. Speaker 3 [00:14:04] I think he is a pervasive across all industries, and there’s a tremendous amount of interest in terms of applying gen AI to drive better forecasting, better predictability, reducing the overhead to make better decisions and drive value. There is a tremendous amount of apprehension about the safety and soundness, as well as about the ethics and trust implications of AI. So responsible AI is top of mind of everybody to make sure that they embrace it in a meaningful way, but do that in a responsible way. I think a year from now, you’ll be seeing a lot of new and novel ways people would have implemented AI to transform their businesses and to really create new and innovative solutions across the board. At the Capgemini Research Institute, just issued research in terms of where some of the key investments are going in terms of digital tools and technology, and what they have found is 88% of the executives are looking to focus on spending to drive AI driven innovation, which is a significant amount. Speaker 1 [00:15:08] Theresa, I keep thinking about that race car because the car doesn’t drive itself. There is a human driver, a highly skilled human driver, who is getting better and better information about when to clutch, when to turn, how the wheels are burning and they figure in a 300 lap race, a great driver can shave a full lap off their time. So that gets back to that efficiency and productivity question. It reminds me of a Disruptors’ episode we did with AJ Agrawal from the Creative Destruction Lab. When we dug into the question, what’s holding AI back? And I think Ashwin’s point really reiterates the message that we need to get beyond predictions. Then maybe it’s time to shift focus away a bit from AI as a technology, and instead look at the economics and the human dynamics of the systems in which it operates. Speaker 2 [00:15:57] Yeah, as a as a formula one enthusiast, I’m just imagining the 2025 champion will be Max Verstappen and his AI copilot. I mean, AI would be just another input into how workers manage their days and their task and organize their lives, right? And to your point about the economics and the human part of it, as anyone who’s worked on an enterprise wide transformation would know, and I’ve worked on a couple, the most important thing is being able to bring your employees with you every step of that journey. There are so many technology implementations that have failed because employees weren’t consulted or trained, or asked to contribute to identifying how that new technology could add value to their jobs and to their teams. And so this is going to be the same thing with AI as organizations seek to implement it and to engender that trust. Speaker 1 [00:16:52] What a great challenge, Theresa, and great calling for any leader or anyone to think about how AI can empower groups. It’s not a plug and play, and we have to think of it as much about culture, as about technology. As you were talking, I was thinking of that great business school case study. I can’t remember the name of it, but it’s about, tragically, a plane crash and the recording from the Black Box shows a real disconnect between the pilots, and it was as much human error as technology error. And that’s important for AI, because a lot of people may think like, why do we need pilots to begin with? Machines can do it and I can do it. Very well, and any pilot will tell you that their job is as necessary as ever. It’s just what they do up in the cockpit is very different, and that includes the way they communicate with each other as well as with the machine. So it does come back to us as people as well as to the technology. Speaker 2 [00:17:48] Absolutely. I actually just read something interesting on pilot and airplane safety, referencing the concept of a cascade of errors, and that often what gets to a fatal plane crash is not just one single mistake. And I think that is a crucial lesson for leaders as we go through this big AI transformative journey, making sure that you identify what it is that the AI can actually offer you and not to misinterpret that, because then that sets off a domino effect across the rest of that transformation. Speaker 1 [00:18:17] Well, let’s hear from someone who is working with many of the world’s biggest organizations on all of these challenges. Anna Paula Aziz was listed by Forbes as one of the most powerful women in Brazil. She’s taken her tech talents around the globe, from general manager at IBM in Latin America to other major markets like the U.S. and China, where she’s focused on digital transformation, AI and hybrid cloud strategy. Today, Anna is the chair and general manager for IBM in Europe, the Middle East and Africa. I got to listen to her on an AI panel and she spoke with me afterwards. Speaker 2 [00:18:54] AI can really drive tremendous productivity. We expect up to $4.4 trillion of annual productivity impact coming from AI. So it’s a big opportunity, and it’s time now to really understand how this is going to be incorporated in our processes and how you work to generate those benefits. It’s early stages that companies are still trying to understand how to get the value out of AI, and at the same time, how to make it safe. I’m excited about improving the productivity that is so needed in the world right now. Speaker 1 [00:19:25] So there’s that word productivity again. But I think Anna would also stress that productivity is not really so much about what technology can do, but what humans can do with the technology. And it was fascinating to hear from organizations at Davos about what they’re doing in terms of sales force enablement, call centers and even coding. Very few executives who I spoke to were looking to cut their workforces in those areas, but rather use AI to enhance the capabilities of whether it’s a salesperson or someone in a call center or even their elite coders. And they’re finding that people can do significantly more with AI by cutting out a lot of those mundane things that all of us have to do. I’m looking forward to the day when AI can take care of my inbox, and that’s just the kind of time saver that will allow all of us to focus on the more inspiring parts of our jobs, and also the parts that create more value for not just for organizations, but maybe for society. Speaker 2 [00:20:26] Yeah, that would be the dream. But I think that in order for an organization to get to that point, data governance and hygiene is so key as companies are thinking about, do I invest in AI? Where do I invest in AI? Before you even get to those questions, I think it’s important to get the data that your company owns and generates in order to bring in or train the necessary talent to be able to manage those technical requirements. Companies are only going to get value from those AI tools and investments that are optimized and tweaked for their own industries and sectors. And again, that’s about managing the data that you have and being able to clean it up properly. So yeah, there’s so much legwork that needs to go in before we can really extract the value of these big AI investments. Speaker 1 [00:21:11] You’re probably very familiar with some of the use cases out there. We’re all familiar with that situation. When you call up a call center and get agitated. They’re now AI applications that help call center staff manage people no matter what state they are in. It’s also helping a lot of salespeople deal with no. As one company explained to me, most of us say no to an initial pitch. Well, AI is actually figuring out ways to get beyond no, and that’s helping salespeople not only increase their productivity, but probably enjoy selling a bit more when you’re not dealing with no all the time. But as you were saying, Theresa, it all comes down to data. And data isn’t just words and numbers. There was a fascinating discussion that I listened to a Davos about visual data. Let’s hear from Nicholas Thompson. He’s the CEO of The Atlantic, which is of course, one of the most respected news organizations in the world. He also chaired this fascinating discussion that included Aiden Gomes from the Canadian startup Cohere, which we’ve had on Disruptors. He’s also the co-founder of speakeasy AI. And here’s some of what he had to say after his panel discussion. Speaker 3 [00:22:20] AI is probably at the center of a lot of those conversations, because people now recognize that it is genuinely changing jobs. It is genuinely changing the way we work, the way we relate to each other. It is genuinely changing democracy. They want to figure out where it’s going so they can plan their next actions. Well, I just moderated a fantastic panel where we covered three main questions. The first was, will it continue to improve as quickly as it has? And the general consensus was yes, it will change in certain ways. We will have to add video in order to improve it. You have to change the way the models are constructed and the data inputs, but they will improve rapidly. Second question was AGI, should artificial intelligence researchers be trying to build something that is more intelligent than humans? And the consensus was, yeah, you’ve got to do that. You also need to do other things. You need to make it as good as possible at certain tasks, like helping with human biology. And then the third question was a very controversial one of open source. So the panel pretty much agreed that open source models, models that people can modify, that can be shared, are better for increasing access to AI and increasing equality. I think a year from now, we’ll have more examples of how AI has changed industries and changed companies and changed individual lives. Right now, it’s still mostly theoretical and next year it will be more real. Speaker 2 [00:23:37] So, John, I’m curious, why is the consensus that AI has to be smarter than humans? Speaker 1 [00:23:44] That was a raging debate on this panel, and it was a fantastic panel that included Yann LeCun, the AI scientist at Meta. And the consensus, after a pretty vigorous debate, is that you can never pull back or rein in intelligence. That is the lesson through millennia of human progress. There are all sorts of aspects of human intelligence that even the most sophisticated AI models are nowhere near replicating. So let’s continue to push our own frontiers of intelligence, but also push machine intelligence, because, like the great space explorers have always said, we just have to explore. We just have to find new frontiers and then decide what to make of it. So maybe it’s a bit of that Buzz Lightyear motto to infinity and beyond. Speaker 2 [00:24:30] Yeah, and I guess some with the large language models that generative AI systems are built upon now, it’s use mostly text as a way to learn. And, you know, we’ve had discussions about the limitations of learning through just text. I think I had read that the average four year old’s ability to learn is better than the most complex LLMs that exists today. And so what other inputs are required to be able to get to that next stage of intelligence, as you mentioned? Video I think, that is a crucial way, but how do these models incorporate video? I’m not sure. Speaker 1 [00:25:06] Well, that’s a real shortcoming of AI. In fact, one of my takeaways and great hopes from this panel was a conviction from some of the world’s leading AI scientists that humans are still way smarter than the best AI out there. So maybe that’s a bit of, relief there. But one of the reasons is that we are visual learners and visual communicators. Machines are great with, data sets with text and numbers, but have no real capacity right now to learn from video or visual records. And that’s actually how we all learned as babies and infants. When you’re three and four years old, you’ve learned, as Yann LeCun said, more than you might learn through the rest of your life. And you can’t read a word, and machines are nowhere near there yet. Speaker 2 [00:25:53] You know, for posterity, the risk averse side of me wants to ensure that with the accumulation and development of this intelligence, that we also build in the proper guardrails and build in the human values that can steer this intelligence rather than just having intelligence for intelligence sake. But it’s housed in a psychopathic model. Speaker 1 [00:26:14] I love that, a psychopathic model. Well, there are many people who have thought more about that question than Andrew Ng. He has spearheaded so many efforts to democratize deep learning, and he’s taught millions of students through online courses. One of the co-founders of Coursera, Andrew has coauthored more than 300 publications on robotics, and his work in computer vision and deep learning has been awarded on many occasions. Andrew has been named one of Fast Company’s Most Creative People. He’s been named time magazine’s 100 Most Influential People in the world, and most recently, he was named one of the most influential people in AI. Andrew is the founder of Deep learning AI and landing AI. He’s a general partner at AI fund and an adjunct professor at Stanford’s computer science department. I got to talk to him in the hallways at Davos. Here’s his take. Speaker 3 [00:27:07] AI is relevant to almost everyone here at Davos. I see a lot of excitement about an identifying building, just finding the right use cases for everyone here. It’s been exciting to speak to a lot of people about what they’re doing. Workforce upskilling and identify use cases of how to build and deploy responsive AI into their organizations. The other dimension of the conversations has been on the regulatory track, how regulators can play a constructive role in accelerating safe adoption technology is something still being worked out. Speaker 1 [00:27:36] It’s one of Andrew’s most provocative lines was you cannot regulate intelligence. And I think that’s the challenge as we think about AI, it’s going to have to have guardrails, as you say, Theresa, but we can’t have regulations that somehow limit those frontiers of intelligence, both human intelligence and machine intelligence. How we get there, open to debate. Speaker 2 [00:27:58] Yeah, this is a very challenging area. I mean, I don’t know I don’t know the answer to that question either. I had the opportunity to chat with Steve Wozniak last year, and he calls for more regulation of the AI industry. But looking at specifically things that are created by AI and that responsibility for anything created by AI and then shared with the public, has to rest with the person or organization that created it. You know, genie’s out of the bottle, but we need to make sure that users are aware of whatever magic is created and that it can be educated accordingly and behave and react accordingly. So I think that is a very elegant solution to what we have right now. And we’ll see in the next few years what else emerges. Speaker 1 [00:28:40] What an amazing opportunity to have a conversation with Woz the brains behind so much at Apple. I’m curious, Theresa, what you think and what he thinks of regulating what hasn’t been created. Speaker 2 [00:28:54] Oh wow, what a deep question. How do you put guardrails around something that doesn’t yet exist? I don’t know, how would you answer that question? Speaker 1 [00:29:03] Well, I don’t think we can, we can only have principles and certainly repercussions for bad actors. For people who knowingly caused damage to others. There was a lot of debate at Davos, especially between the Europeans and the Americans, as to whether to take a prescriptive and even preventative approach or more of an innovation mindset, to this new frontier of AI. I think we’ll see the Europeans continue to try to prevent missteps, whereas the Americans would prefer to let people take steps. And if there are missteps, then correct for those with whatever mechanisms, society has. No perfect way at it, and we as Canadians will probably find a middle path there. But the world is moving rapidly into a new era of AI, and we all have to be aware of both the opportunities and those risks. Speaker 2 [00:29:55] Yeah, I think of that early Google ethos; don’t be evil. I think you can’t quite regulate something that it doesn’t yet exist, but you can set an intention for what you hope you can create. Speaker 1 [00:30:07] What a great word to end with “intention”. We all have to be more intentional when we take on AI. Theresa, thanks so much for being on Disruptors. Speaker 2 [00:30:16] Thanks for having me John. This has been awesome. Speaker 1 [00:30:20] This is disruptors, an RBC podcast. I’m John Stackhouse. Talk to you soon. Speaker 2 [00:30:30] Disruptors an RBC podcast is created by the RBC Thought Leadership group and does not constitute a recommendation for any organization, product or service. For more Disruptors content, visit RBC.com/Disruptors and leave us a five-star rating if you like our show.

Speaker 1 [00:00:01] Hi, it’s John here. Before the holidays, I was in Dubai for the climate conference known as COP28. And whether you’ve been to Dubai or not, when you think of that great cosmopolitan hub of the Persian Gulf, well, you may think of a tropical desert climate or that iconic skyscraper that Tom cruise scaled down in one of the Mission Impossible movies. One morning when I was there to catch the sunrise, I went up the Burj Khalifa and was awestruck to see the sun come over the horizon and light up the desert. And with that, so many different energy sources. Of course, there were the oil rigs and gas facilities, but there were also solar fields and wind fields. And that’s the ambition of the Middle East and the ambition of so many countries in the world today, to diversify through innovation, the kind of energies that we need to power our lives. Hydrogen was the talk of the town in Dubai and maybe, just maybe, the climate tech of the 2020s. As I met people from all around the world at COP, everyone seemed to have an eye on hydrogen. I met some Saudi business leaders who were actually moving to China to help advance green hydrogen. And Americans are all over this. In fact, they’re talking about Texas, the great oil state becoming a green energy hub and exporter of hydrogen for the world. Countries big and small are seeing hydrogen as an opportunity to convert wind and solar and gas and even nuclear into molecules that they can ship to people and to industries all around the world. As hydrogen, and especially green hydrogen, continues to be a hot topic in 2024, Canada is at the centre of many of these conversations, and we’re eyeing a piece of that pie. So can green hydrogen be the next great Canadian energy export? Will it be the tech innovation of the decade? And if so, how can Canada, a country filled with vast renewable resources, navigate the complexities of the technology as well as the economics and politics? This is Disruptors, an RBC podcast. I’m John Stackhouse. The green hydrogen race is on. A report released by Deloitte suggests there’s an investment of $9 trillion needed over the next 25 years — that’s globally — that could create $1.4 trillion per year in exports. How we power our ships, factories and perhaps even our cities is at stake. And sustainable innovation is needed as a vehicle for change. Whether it’s funding, research, infrastructure development or technology advancements across the energy sector, capital markets have a critical role to play in scale and adoption. In Canada, we’re seeing massive commitments to hydrogen projects along the Atlantic coast and up the Saint Lawrence Valley in Quebec that could become a major source of energy exports. But before we hear from some hydrogen innovators, I, for one, wouldn’t mind a hydrogen for dummies. So, we called up Ivette Vera-Perez. She’s president and CEO of the Canadian Hydrogen and Fuel Cell Association. Ivette, welcome to Disruptors. Speaker 2 [00:03:12] Thank you very much, John. Speaker 1 [00:03:13] It’s great to have you on the podcast. And if you don’t mind, I want to start with the basic, question what is hydrogen? Speaker 2 [00:03:19] Hydrogen is an element arguably the most common element on Earth, it’s the lightest element as well. It can combust as well. So that’s what makes it attractive as a fuel source. Speaker 1 [00:03:31] And we all been hearing about hydrogen in all sorts of places, especially over the last few years. Why is there so much excitement? Speaker 2 [00:03:37] So hydrogen can be used to displace pretty much any fossil fuel. It is very evident that one of the biggest challenges we’re facing is climate change. And that is where hydrogen can come in, because it’s a valuable vehicle in decarbonizing a number of sectors. The steel industry, for example, one of the highest emitters. You can also decarbonize buildings etc.. So, it is a very versatile vehicle when it comes to decarbonization. Speaker 1 [00:04:04] There’s an old saying that hydrogen is the energy source of tomorrow and has been for 40 years. Why do you think we’re going to see hydrogen at scale in this decade when we haven’t seen it in previous decades? Speaker 2 [00:04:17] So the role of hydrogen in decarbonization is a current need, is not a need that we had in the past. The whole world has now embraced hydrogen. So, you’re about to see the economies of scale and a massive number of projects get into final investment decisions. That was not something that you saw a couple of decades ago. Speaker 1 [00:04:36] We hear a lot about the colors of hydrogen in the so-called hydrogen rainbow. There’s blue hydrogen, grey hydrogen, even pink hydrogen. Can you walk us through the key colors and what’s different about them? Speaker 2 [00:04:47] Yes. Green hydrogen is hydrogen produced by electrolysis from renewable energy sources, for example, wind or solar. Blue hydrogen is produced from fossil fuels. There’s also, like you said, purple or pink that can be produced from nuclear sources. There is also turquoise and that is hydrogen that is produced by thermally splitting methane. There is yellow hydrogen that is produced from by electrolysis. But using the grid, there is also white hydrogen that occurs in natural form that can be extracted. And the typical hydrogen that we know off from fossil fuels without capturing that would be grey or brown or black if it is from coal. So many, many colors. Speaker 1 [00:05:49] And how do you make hydrogen from all those different materials and elements? Speaker 2 [00:05:53] Electrolysis is one process. And by the way, Canada has been since 1905 a leader in electrolysis, the way in which you produce green hydrogen from renewable electricity. The idea is that you basically split water into hydrogen and oxygen. Now, if you did blue, that would be steam methane reforming or auto thermal reforming. And then you capture that CO2. Speaker 1 [00:06:25] Finally of that as you look into 2024, what are you most excited about? Speaker 2 [00:06:29] 2024 is going to be a crucial year. I really want to get to the day when, instead of saying hydrogen has the potential to decarbonize in steel, hydrogen has the potential to decarbonize transport that I can say hydrogen is decarbonizing steel, hydrogen is decarbonizing transport. So it’s very much an action year, right? Speaker 1 [00:06:48] That’s a great message. It’s an action year. Ivette, thanks for explaining hydrogen and making the case for hydrogen. Speaker 2 [00:06:53] Thank you very much for having me. Speaker 1 [00:06:56] That really helps set the foundation for our conversation. Now we’ll hear from Gene Gebolys. He’s the CEO of World Energy. Gene and I actually met at that climate conference in Dubai, where we shared a taxi and had a great and really animated conversation. He’s played a leading role in building today’s global biofuels industry. Way back in 1998, he launched World Energy to accelerate the commercialization a viable alternatives to fossil fuels. And today, a quarter century later, World Energy provides a wide range of low carbon solutions focused on helping make net-zero commitments real, including a huge investment in Atlantic Canada. Jean, welcome to Disruptors. Speaker 3 [00:07:38] Great to be here, John. Thanks for having me. Speaker 1 [00:07:40] It’s wonderful to have you on the podcast. I wonder if you can give us a bit of a sense, first of all, of World Energy. Tell us about the company and where it’s come from, but also what attracts you to green hydrogen? Speaker 3 [00:07:51] So, World Energy has been around for a quarter century, and we’re an advanced biofuels company. We started to accumulate assets to produce a biodiesel, one of them being in Hamilton, Ontario. And then about six years ago, we acquired a refinery in Los Angeles, and we became the first commercial scale producer of sustainable aviation fuel. And that led us to, well, we’re making this product out of grey hydrogen. How do we improve the carbon characteristics of the hydrogen? And we started World Energy Gh2 to really focus on Atlantic Canada as a super promising place for the production of hydrogen. That’s kind of the genesis of how we got from a quarter century of advanced biofuels production into focus on Atlantic Canada and green hydrogen production. Speaker 1 [00:08:41] So one thing has led to another to another, what’s the appeal? You’re talking to us from Boston, where you’re based. What caught your eye in Atlantic Canada? Speaker 3 [00:08:52] Well, one, you have to have an exceptional renewable resource. Two, you’ve got to be able to build the project in a place where people want the project to be built. And three, you’ve got to do it in a place where the host country is going to support the development of the project. If you can’t answer all three of those to the affirmative, don’t do it. The province has been extremely thorough and very supportive. We were out talking to the local First Nations’ leaders about what their thoughts would be about this. So it’s been really a team effort out there. I couldn’t believe it when I think it was in November, there was a rally in Stephenville in a town of, I think 1500 people. They had about 2000 people there rallying in favour of the project, uh, which is pretty unusual. We’re doing a big project in Los Angeles. I don’t think anybody’s ever held a rally for us in LA. We get good local support, but not like we get in Stephenville. Speaker 1 [00:09:52] Stephenville, for those folks who haven’t been there, is pretty different from LA. It’s an old mill town for those who aren’t familiar. But when the wind picks up on that coast, boy, it’s a force. Speaker 3 [00:10:02] Yeah, the project name is Nujio’qonik, which means “where the sand blows” in the native tongue. And this is one of the best wind locations on planet Earth. I don’t know if it’s fortuitous or just flat out lucky that we kind of focus in on this area, but it is, without question, one of the greatest places on planet Earth to be working on a project like this. Speaker 1 [00:10:30] Geve, I wonder if you can tell us a bit about the tech model, and then we’ll get into the business model. So, you’ve got all this wind around Stephenville, but obviously there’s not a lot of demand for that electricity. So, you got to turn it into something and ship it. So walk us in lay terms if you don’t mind through how that happens. Speaker 3 [00:10:47] Yeah. So, hydrogen’s a very small molecule. And so the way you move hydrogen long distances is usually to convert it into something else. So, as you said currently there’s not a lot of hydrogen use in around the West Coast in Newfoundland. And so, the fundamental concept is you take the wind resource that would otherwise just blow and not be captured, capture that wind, convert that wind and water into hydrogen, and shipping it to where you need to ship it to — Europe being the most likely target. The interesting thing that’s emerging is the opportunity to potentially keep the hydrogen local in Newfoundland. So that’s something that we’re developing now. But it’s got really tremendous promise in terms of a longer term view for how can you take the resources of the province, upgrade those resources in the province, and then the reduction in carbon intensity in that conversion process right there, can be sold into the marketplace for its carbon reduction characteristics. Speaker 1 [00:11:57] All of this is going to require huge amounts of capital, billions and billions of dollars. How are you thinking about de-risking that investment? Speaker 3 [00:12:08] This is an enormous endeavor. As you know, this is scoped out at about a $12 billion project. You’ve got to put together partnerships. It’s host country, destination country, the supplier, the off taker. These are highly integrated endeavors in which you’re satisfying a whole range of objectives as you try to produce a commodity in a lower carbon way. Most importantly, you have to answer the question about how are we going to pay for that carbon difference? You can do it through government regulation. You can do it through subsidy. But most importantly, you’ve ultimately got to do it based on market dynamics and the service gets monetized separately. We’re in the early days of looking at all hard to abate sectors in this manner, where this is really an economic problem as much as anything, right? You need to be able to connect customers who want something with the supply of that something. The problem in these hard to abate sectors, whether it’s cement or steel or aviation, is the moving the molecules around to create the lower carbon products. So you’ve got to make the differential as cheap as it can possibly be, and then make up the difference in a way that you can count on monetizing the spread to the higher carbon alternatives. Speaker 1 [00:13:36] We’ve been talking a lot about what you’re doing in Stephenville, and that’s impressive. There’s also incredibly impressive things going on around the world in hydrogen generally and green hydrogen specifically. You’re a global investor, as I mentioned earlier, based in Boston. What if you can give us a sense of what Canada’s got, what our strengths are in eyes of an investor and operator like you, and also maybe what some of our weaknesses are that we need to come to grips with as global competition heats up. Speaker 3 [00:14:07] Hmm. Well, Canada is just an ideal place to do the kind of work that we’re doing. The work we’re doing is very land intensive. So in a place with very low population density, like where we’re operating in Newfoundland, where you’ve got very supportive local communities, uh, you’ve got the land. Canada being a G7 country in a world in which we’re increasingly sensitive to geopolitical risk — super helpful. There are places in northern Africa, for example, that have really good wind resources, but a lot more geopolitical risk than does Canada. So, Canada has an immense amount of natural benefit to be arguably the leading player globally in the emergence of clean hydrogen. Speaker 1 [00:14:57] What are we lacking or what do we need to come to grips with to be that? Speaker 3 [00:15:02] Look, I think, I think the jury’s still out on whether Canada can muster the national will to do really big things. And the global stage, Canada is sometimes seen as mired in process, can’t do things that are obviously in its own interest and sometimes lack political will. And I think that’s a big, sweeping assessment. I hope it doesn’t come across from an American like an indictment, but I think that is the question, uh. Speaker 1 [00:15:30] Because a lot of Canadians would share that view. Speaker 2 [00:15:32] Yeah, I don’t think I’m going out on a limb, I’m not making it up. Speaker 1 [00:15:35] It’s important to hear that from others, too. Speaker 2 [00:15:37] Yeah. But I think that that’s the real question mark. Can Canada come together at the provincial level, at the local level, at the national level and say, look, this is going to be something we’re going to do? Speaker 1 [00:15:49] I wonder, Gene, if I can wrap up with a final question about 2024 and what excites you most and what concerns you as we look at the year ahead? Speaker 1 [00:15:58] Well, what excites me most is this, uh, potential to move beyond just government action. And what really excites me is private sector first movers, who are looking to create a low carbon solutions for consumers. That really allows tremendous economic power to get unleashed. You know, it’s hard for me to describe effectively how much economic power there comes from being able to sell decarbonization separate from the physical molecule that enables that. This is called insetting many people familiar with offsets. These are insets because they’re in sector displacement of carbon. That’s a super powerful force. And in 2024, that really starts to move beyond its infancy. Speaker 1 [00:16:49] What a great message to wrap up with, Gene. Thank you so much for being on Disruptors. Speaker 2 [00:16:53] John, it’s been a blast, I appreciate it. Speaker 1 [00:17:06] Our next guest is Marco Alvera. He’s the CEO of Tree Energy Solutions (TES), which is one of the world’s leading hydrogen players. TES operates globally and has ambitious plans in Quebec, where it’s aiming to build a massive green hydrogen plant. Marco, welcome to Disruptors. Speaker 2 [00:17:23] Thanks, John. Good to be here. Speaker 1 [00:17:25] Let’s start with the name TES. Where did that come from? Speaker 2 [00:17:28] So the idea is that we are inspired by nature. And when you look at a tree, the tree grows by absorbing carbon in the trunk. And the wood is actually made of carbon. So there’s this whole notion that carbon is bad. Of course, it’s very bad if it’s in the atmosphere because it causes global warming, but it can be very useful in nature. And so what the whole premise is that we use carbon as a means of moving renewable energy from where it’s abundant and cheap to where it’s needed. And the whole idea is to make it as natural as possible and to make it as cheap as possible. Speaker 1 [00:17:59] And this fits into your model, even philosophy of, if I can put it that way around a circular carbon economy. We’re talking about green hydrogen in this episode. Where does green hydrogen and how does green hydrogen fit into that circular carbon economy? Speaker 2 [00:18:14] So let’s start off with some key facts. Green hydrogen has been prohibitively expensive. I used to hate hydrogen. I loved it as a molecule, but never thought it would work just because of costs. To put it into perspective, when oil was at $20 per megawatt hour. Green hydrogen was about $1,000 per megawatt hour. Now we have oil that went up to about 60, 50, $60 a megawatt hour. The cost of the cheapest solar and hydro and wind is way down to about 20, 30, $40 a megawatt hour. So cheaper than oil. So what hydrogen is, is a means of turning that solar and wind and hydropower into a molecule, into a fuel that we can use. So hydrogen is not a source of energy. It’s a way of moving electric energy into fuels. So this is a new market. It’s going to be a big market. It’s going to be a market, you know bigger than the market for oil today. It’s all going to happen in the next 20-30 years. So it’s very exciting opportunity a. To save the world and and try to stay within two or as close to two degrees as possible. But also it’s a huge business opportunity. We’re going to be building a new energy system which is more resilient, cheaper geopolitically, more spread out and really exciting. Speaker 1 [00:19:32] What attracted you to Canada and also to Quebec? Speaker 2 [00:19:36] Canada is just a terrific country when it comes to the opportunity for green hydrogen, and it’s a country that has significant gas demand, significant space, significant renewable potential in Quebec and elsewhere, and could potentially and will become a big export centre as well for green energy. The opportunity specifically is to take hydropower and take biogenic CO2 and come and create this hydrogen. So we create synthetic methane and we serve that locally to a utility. And this is very circular. So it’s this idea that you can use what’s otherwise maybe far away or maybe hard to store. And you kind of turn what is a renewable energy source into a fuel that you can use in today’s infrastructure. Speaker 1 [00:20:39] Walk us through the hydrogen component of this and what your vision is for Project Mauricie and Quebec. Speaker 2 [00:20:46] So the idea is rather simple. You take, uh, hydro power and you use those electrons. You run them through what is called an electrolyzer. And the electrolyzer has the ability to separate in water the oxygen from the hydrogen. The hydrogen will then be used for two separate purposes. One as pure hydrogen for local demand. So that’s a market that you serve directly with hydrogen. There’s other markets which are now served by natural gas where if you were to serve them with hydrogen you would need to change some infrastructure, the burners, some pipes, some valves. And so instead of changing the infrastructure to accept hydrogen as a fuel, you turn hydrogen into synthetic methane, which is a fuel that you can use immediately. So that’s the business case is to build two products. One is a byproduct of the other. So hydrogen is call it the base product. And ENG is a byproduct of hydrogen. Speaker 1 [00:21:50] What do you anticipate will be the most significant and uses for this hydrogen? Speaker 2 [00:21:55] So if I look at hydrogen in general, it’s best applied to so-called hard to abate sectors. So it’s uh ships, it’s long distance trucks, it’s, uh steel. And, and also, uh, wherever you need storage, which is beyond a few hours. So the uses for hydrogen is essentially wherever you can’t use the batteries or direct electrification. The other benefit of hydrogen is that you can move it around much cheaper than electricity, because you don’t have to build the high voltage grids. You use the existing gas system. This is where countries like Canada have a starting advantage, because there’s a lot of natural gas infrastructure in the country, built over decades and decades, worth billions and billions of dollars, that can be used immediately and seamlessly to move the renewable energy around. Speaker 1 :22:43] Marco, I’d like to ask about a couple of challenges. One is geography and the other is the risk horizon for hydrogen. So first, on geography. For those who aren’t familiar with the Mauricie area around Shawinigan, it’s one of the most beautiful parts of the country. It’s also far from a lot of the industrial centres that are going to need a lot of that clean power that you’re talking about. Is that a factor at all in how you’ve been thinking about the project? Speaker 2 [00:23:08] So, the opportunity for hydrogen is just that, you can move it invisibly because it’s in an existing, uh, pipeline system. So you don’t need to touch anything with the environment. The footprint of the Electrolyzer is very, very small. The visual impact is negligible, and it allows you to move renewable energy from where it’s available. And in Canada, it’s at least in the same state. You know, what we’re doing in Texas is moving it from Texas to Germany. We’re taking solar and wind from Texas and moving it into a factory in Germany by converting that solar and wind into hydrogen. So the distance is actually the opportunity, because it allows you to go and tap into the cheapest renewable energy in the world. And that’s the only way we’re going to make renewable energy cheaper than oil. Speaker 1 [00:23:53] Talk to us a bit, Macro, about the financial risk questions around hydrogen. You referred to a 20 to 30 year time horizon. It’s great to have investors who have that long view. But, uh, sometimes those investors can be few and far between. How are you managing the risk outlook around hydrogen as well as business models that are evolving? Speaker 2 [00:24:15] So I spent 20 years working in oil and gas. And, uh, these are some of the lowest risk projects I’ve ever seen. First of all, everything you’re building is above the ground. You don’t have any geological risk. It is a capital intensive business, but it’s very financeable because we’re using existing technologies to transform what could be stranded assets. If I think of a solar and wind. I was yesterday in, in Saudi Arabia, uh, if you if you think about some of the massive solar potential you have in the deserts, you turn that stranded solar into something that you can sell, uh, for a fixed price in a different part of the world for the long term. So the risk adjusted returns are very attractive. You don’t have the volatility you have when you’re investing in oil and gas, and you don’t have the unpredictability when you’re drilling below the ground. And you may encounter some different geology than what you were expecting above the ground. And it’s all tried and tested. So, technologies will evolve, prices will come down. But my key message, as we have today, all the technologies we need to really scale this up, uh, gradually, uh, but very significant. Speaker 1 [00:25:29] What do you see as the key obstacles that you and others are going to need to overcome in the coming years? Speaker 2 [00:25:35] So the biggest challenge is to make the cost of electrolyzers lower. I’ve been writing about this for the last 5 or 6 years. I’ve been investing in electrolyzer companies. I really see the trend going down, but I think it’s up to us as an industry to help accelerate that cost curve and avoid what happened with solar. Solar went from 1000 to 10 over 15 years period, and China built all the manufacturing for those panels. Hopefully when it comes to Electrolyzer, there’s going to be electrolyzers in Canada and the US and Europe as well as in China, and we can have more of a global competition and really help drive those costs down. Speaker 1 [00:26:10] Before we move to close, Marco, I wonder if I can ask you a final question about the year ahead. You’re an optimistic person. You’re an entrepreneur. You’re a builder. You’ve shared with us some of the concerns and challenges. I’m curious what gives you the most hope in 2024 and what you’re looking to see in the coming year when it comes to green hydrogen? Speaker 2 [00:26:28] So we had a very important COP, the last COP, which is the UN climate conference that was held in Dubai. It was critically important because the world agreed to start phasing away from fossil fuels gradually, constructively. But the direction of travel is set. I hope that the next COP, which is going to be in Azerbaijan, will be finally a COP, where we go from talk to action. There’s a big gap between the ambition and the reality. If 24′ is the year of the FIDs, which means the final investment decision, which means the project has moved from paperwork essentially in contracts and negotiations to steel, that will be very, very good news for climate, for business. And I’m very optimistic, but I’m also very pragmatic. And so I know the limits of what can be done and what cannot be done. And we’re very focused on executing on these projects because they absolutely can and will be done. Speaker 1 [00:27:24] What a great note to wrap up on. This can be the year of FIDs of final investment decisions. Marco, thank you so much for being on Disruptors. Speaker 2 [00:27:31] Thank you. Great to be with you. Speaker 1 [00:27:37] It’s hard not to be excited about the potential of green hydrogen. But of course, hydrogen has always had more potential than payoff. Maybe that’s changing. Maybe this will be the year of accelerated change. There are certainly extraordinary things underway around the world, and Canada can be at the front of the pack. We have an abundance of renewable energy, the solar and wind power that hydrogen relies on. And we have the infrastructure. Think of the hydro lines and pipelines that are the backbone of a hydrogen economy, that can make us a global player. Of course, the hydrogen promise is about more than our carbon footprint and developing cleaner sources of energy. It’s about thinking of a new industrial model for our economy. Green hydrogen can be about our future energy mix. It can open avenues for economic growth and job creation. And by addressing the challenges head on, Canada can be a global hydrogen leader. Until next time. I’m John Stackhouse and this is disruptors, an RBC podcast. Talk to you soon. Speaker 4 [00:28:44] Disruptors and RBC podcast is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. For more Disruptors content, visit RBC.com/Disruptors and leave us a five-star rating if you like our show.

Speaker 1 [00:00:01] Hi, it’s John here. Welcome back and happy New Year. I don’t know if you’re like me and make New Year’s predictions and even resolutions. I won’t bore you with mine, but I was struck this year by how negative so many outlooks were for 2024. It seems like we all need to brace ourselves for a pretty bumpy year ahead. Now, 2023 was a year of disruptive change, with the cost-of-living crisis, rising geopolitical tensions, the ongoing climate emergency and rapid technological transformation. Speaker 2 [00:00:32] Will inflation get better for Canadians who are really feeling the price? Speaker 1 [00:00:37] Countries continue to deal with the aftermath of the pandemic. With inflation and looming recessions. Tensions in the Middle East have escalated further tonight, and Israel continues. There’s the Hamas Israel conflict, civil war in Sudan and so many other places. The ongoing war in Ukraine, they all continue to have far reaching implications. Speaker 2 [00:00:55] According to the United Nations, India surpassed China as the most populous country on the planet. Speaker 1 [00:01:00] For the first time in more than two centuries, the global order has shifted. India’s population eclipse China’s. Speaker 2 [00:01:07] 2023 is set to be the warmest year on record. Speaker 1 [00:01:10] Climate change is no longer a threat, it’s the world’s new reality. Speaker 2 [00:01:13] If there’s one word that’s been at the top of every tech companies mind lately, it’s AI. Speaker 1 [00:01:20] ChatGPT, and AI, they’re exploding onto the scene, and new technologies continue to disrupt our daily ways of doing things. But amid all that murky backdrop, there’s always hope and opportunity. There’s a tech resurgence already underway, and it may rise like a phoenix from the Silicon ashes. A future filled with AI is no longer a concept, it’s a dynamic reality shaping the future before our eyes. Speaker 2 [00:01:44] The second biggest item in the budget after health, is boosting clean energy. Speaker 1 [00:01:48] And advancements in clean tech continue to be a driving force for progress. Innovative technologies seek to revolutionize the way we connect, create, and work to solve some of the most pressing issues. To come this year on disruptors. We’ll continue speaking with Champions of Change and Icons of Innovation as they navigate the twists and turns of an increasingly disruptive world. We can’t promise a smooth road ahead, but we will do our best to help you navigate it. 2024 isn’t just a new year. It promises to be a pragmatic shift into a digitally charged future. So, join us next week as we kick off the 2024 edition of disruptors with a special look at green hydrogen. Will it be the tech sensation of the 2020s or just another distant promise? Until then, I’m John Stackhouse and this is Disruptors, an RBC podcast. Speaker 2 [00:02:45] Disruptors, an RBC podcast is created by the RBC Thought Leadership group and does not constitute a recommendation for any organization, product or service. For more Disruptors content, visit RBC.com/Disruptors and leave us a five-star rating if you like our show.

Speaker 1 [00:00:01] Hey, it’s Theresa, and I’m back for a special edition of Disruptors. Today, John is in the hot seat to talk about his time at COP28 in Dubai. This year, there are about 100,000 people on the ground officially making it the largest U.N. climate summit ever. And while the conference is no stranger to controversy and at times disappointment, it was also filled with collaboration and innovation, with some historic agreements made in the fight against climate change. So what was Canada’s role in the world stage? What are some of the key takeaways from this year’s climate talks? And what can we be hopeful about as we look to the future? This is a special edition of Disruptors an RBC podcast. I’m Theresa Do. Speaker 1 [00:00:55] John, it’s great to see you. It’s great to be back on the podcast. It’s been so long and I’m really excited to get into your trip abroad and to hear more about all the historic agreements and conversations that have been made that are so important to the work that we’re doing at RBC and of course to the broader global context. Speaker 2 [00:01:14] Thanks for much. It’s great to be with you again. Speaker 1 [00:01:16] So can you set the stage for our listeners? What was it like this time around? How was this cop different from the previous cops you attended from other global conferences such as Davos? What was the vibe like? Speaker 2 [00:01:29] So this is called COP28, which means there’s been 28 of these. This one was like no other. Imagine 100,000 people gathering in Dubai, one of the world’s great oil centers, to talk about the climate crisis. So that was a bit of a mind shift for a lot of people. That was three times the number who were at Glasgow, which was, of course, a historic climate conference. But a different way of looking at that number is to think of it in terms of the challenge to the planet. This is a huge, maybe the biggest challenge to the world, and it’s going to take a lot more than 100,000 people to solve it. So we do need big gatherings of people to work through some of these epic challenges. Dubai was a really interesting place for a climate conference and there was a lot of resistance on that fact. A year ago, I remember people talking about boycotting it and that kind of faded away. I think people realized whether you are for or against or neutral about oil and gas, we have to come to grips with oil and gas if we’re going to get to net zero. So let’s do that with the people who produce it. And we all consume it in different ways and work through some of the challenges. And that many ways is what COP 28 became. It became an oil and gas conference that was the first and the last order of business. Lots of other things that went on that we’ll talk about. Speaker 1 [00:02:52] Yeah, and in some ways, to be able to meet those epic challenges, you have to open the tent and ensure that everybody is at the table, including those who had the major oil corporations in the world. So let’s dig into some of those epic challenges and some of the successes and agreements that were reached. Can we talk about methane? Can you share more about the methane agreement that was reached? Speaker 2 [00:03:12] Yeah, well, that’s probably the most significant material thing to come out of this court. Maybe the declaration on fossil fuels at the end is also going to have some significant lasting impact. But the methane agreement, I mean, some people are comparing it to and I’m going to go back to the 1980s here, but to the Montreal Protocol that dealt with CFCs, the stuff that comes out of refrigerators and was causing holes in the ozone layer. I’m not sure we’re at that yet with methane, but this was an agreement by most of the world’s methane producers, including Canada, to get methane emissions down by 75% by 2030. That’s a major, some may say massive commitment. And now it’s a challenge to actually do it. But it’s important to have a goal like that to then turn to action. The core methane challenge comes from natural gas production. So you drill a well and you’ve got to essentially allow methane to leak or go into the atmosphere. If you try to contain it, things are going to explode. So that’s not a good thing. But there’s actually ways of capturing the methane and reusing it or keeping it from going into the atmosphere. The industry’s already been on this actually for economic reasons. And frankly, a lot of the best climate action in the world is driven by economic necessity. So gas companies and oil and gas companies have been working on reducing methane for a number of years. Canada has been a leader in this. Now it’s time for action. So all eyes are going to be on both the private sector and the governments that regulate them to see how progress is being made. Speaker 1 [00:04:50] And if we stay on oil and gas for a moment. COP28 reached an historic agreement to phase out fossil fuels. Of course, there’s very precise language that was bantered back and forth for 48 hours or so. Can you tell us more about this agreement, why it’s historic and what that means for the future? Speaker 2 [00:05:09] It’s always interesting to see people and nation states and their governments get really fired up about language and word choice. And this cop was almost inflamed by that choice of words about phasing out or phasing down fossil fuels. And it was politics and diplomacy at Decibel 11. On some days, the Saudis were very audible in encouraging other countries, especially other oil producers, not to agree to anything that might spell the end of oil. In the end, and this is what diplomacy often does. Fresh words were put on the table about transitioning away from fossil fuels. Some people see that as watering down of the language. But I think a different interpretation is that this is the first time a COP conference and by extension the United Nations. So the community of nations has put on paper and people have signed a declaration about fossil fuels coming to an end. Is this the end of the oil era? Well, if it is, wow, that just happened in Dubai, right in the middle of the Persian Gulf. That’s an incredible moment, but we’ll see. These are just words. And now it’s going to be to action. But there were also some important words that were associated with it. That, you know, we have to stick to the timeline as dictated by science, which is sort of code for we’ve got to get to net zero by 2050. We’ve got to reduce oil and gas production before 2050 to get there. And other declarations from science that will no doubt be the stuff of future cops and ongoing heated debates. Speaker 1 [00:06:45] And from my understanding, Canada played a very important, orchestrating role in reaching the final words in this agreement. In another area, in Agriculture, Canada also plays a leading role in supplying food and the necessary inputs for agriculture production for the world. And there was also a deal reached on agriculture at COP. Is there anything you can share about that? Speaker 2 [00:07:10] Yeah. It’s important to remind ourselves of the role that Canada does play and is expected to play on the world stage. Steven Guilbeault The Environment and Climate Change Minister has been to every cop as he likes to remind people. He’s a bit of a cop junky, but he’s respected by the crowd there. Canada’s willingness and ability to host the biodiversity summit a year ago in Montreal was really important to China, which was not able to host it because of COVID. So the Chinese, I think, have a willingness, at least in climate negotiations, to listen more to Canada. And we’re seen as a bridge builder with developing countries with other oil and gas producing nations. We are the fourth largest oil producer in the world with the United States, which is our neighbor and active trade partner. So Canada does have a special seat at the table and is able, especially in contentious moments, often to build those bridges. Agriculture is one of the areas where Canada does play a leading role, but I think there was a bit of disappointment on the AG front. This was the first cop that AG was center stage. There was a full food, water and Agriculture Day, which is an important declaration by the United Nations to say that AG is central just as oil and gas is and other sectors to our journey to net zero. But what are we going to do about it? It’s fine to shine a light on it. It’s fine to say the positive role that AG can play. So maybe this is baby steps. We have to make much greater commitments, especially on the financing of agriculture, to help farmers continue to develop sustainable agriculture and climate smart agriculture techniques and to ensure that they’re rewarded for those that this isn’t a punishment or a regulation on farmers, but is in fact an economic opportunity for them. Speaker 1 [00:09:05] Do you see lasting change to how the world produces food coming out of this COP? Speaker 2 [00:09:12] So an interesting fact about this, this cop, if you’re going to have a hundred thousand people, especially in a confined area, you’re going to have to feed and water them. In fact, the last cop to Egypt became a bit of a bit controversial because they ran out of food and water in the in the early days. They resolved it. But certainly people remember that a year later. Speaker 1 [00:09:32] Oh, dear. Speaker 2 [00:09:32] And the host, the UAE, had plenty of food for sale for 100,000 people who were there. And the majority of the food was plant based. And that was an important statement, I think, by the UAE that you can offer food at scale. And it was fantastic and very creative and represented the cuisines from multiple continents. But you can do that in a creative and economically mindful way. So an interesting proof point to to the world and to your question, how do we change the production as well as the consumption of food? The world’s growing. We’ve written about this from the RBC Climate Action Institute perspective. We’re going to have to play a role in helping to feed nine, maybe 10 billion people and do that in a way that reduces emissions. So that’s going to mean some adjustments to diet, but it also means we’re going to have to invest more in abatement technologies. So things like anaerobic digesters that capture the stuff that comes out of livestock because animal protein is going to remain critical for a long time. How to help those farmers with the technologies and the measurement systems to change their soil practices, to capture more greenhouse gases in their soil and reward that. So it’s not just changing practices, it’s changing economic models to ensure that the producers, the ones who manage emissions on the planet’s behalf, are rewarded for their work. Speaker 1 [00:10:59] Mm hmm. Yeah. Especially as we’re heading into the holidays. Now, I think the call to change both the supply side of agriculture, but also the demand side and how we consume, I think that’s a very important reminder for folks about what we put on our Christmas table, our holiday table being a real important step for the future. So moving now to buildings, which is the third largest emitter in Canada, 40% of emissions worldwide. At COP Canada, along with the UAE, announced the cement and concrete breakthrough initiative, which is important as a way to signal to the world that these critical inputs and materials need to change. So what did you hear on the ground there? What do you make of this initiative and how do you see it making an impact? Speaker 2 [00:11:43] There aren’t many better places for this kind of discussion than Dubai. It’s one of these fantastic newish cities literally growing out of the desert in the last half century, but critically, in the last 25 years. It’s hard to spend any time in Dubai without hurting your neck, looking up, up on up. All these new towers, including the tallest in the world, are their made out of glass and steel predominantly, and a lot of energy, a lot of burning of fossil fuels goes into creating that glass and steel and cement that we all need for the cities that we enjoy and the kinds of cities that much of the world is looking for. So when we look at Dubai, be mindful that millions, maybe billions of people are saying that’s the kind of city we need in our country as our economy grows. That was one estimate. I heard a COP that the world is going to double the built environment over the next 25 years. So we’re going to see more Dubai’s around Africa, across Asia, as populations grow and people need places to live and work. And we know how to build those cities. We just don’t know how to build them in a climate minded way. So we need a number of things in the built sector, but a different approach to materials is critical. And that was an important agreement there. There’s a lot of chatter about the number of business people now at COP, and in some ways has become almost a business conference. But I ran into a number of executives and engineers and even architects from around the world who were there to learn from each other, but also to look at new materials, new technologies so that they can go home and rethink or reimagine the way that they put up their next high rise or build their next expressway. So that’s another important side of COP. It’s not just diplomats negotiating words, it’s people who actually make climate action happen on the ground, coming together to share ideas and also push each other for these technological changes that are going to be needed to ensure when it comes to buildings, but many other sectors, that we do things differently over the next 25 years. Speaker 1 [00:13:53] And a great opportunity for Canada to lead and offer our own learnings over the past several decades. Speaker 2 [00:13:59] Well, some of the biggest developers in the region are great Canadian companies. It’s one of our exports. We’re a nation of developers. You have to be in a cold climate, but a nation of great engineers and planners and architects who are out there in the world helping to build those cities of tomorrow. And it would be great to see Canada play an even greater role in building the net zero cities of tomorrow. Speaker 1 [00:14:27] As we wrap up this conversation, John, hoping to get your reflections on what more would you have liked to see from COP this year? Speaker 2 [00:14:37] What a great question, Theresa. I think there is a number of things that fell a bit or a lot short. One is on finance. This is going to take trillions of dollars and the world is still falling really, really, really short in terms of mobilizing the capital for the transition. Developing countries, the low income countries of the world, continue to come to COP expressing their frustration that they need funds and it’s not handouts. A lot of this is debt financed to build those new cities that we’re talking about or to invest in new energy systems, in renewables. I got to spend time with different representatives of African countries who said, we know what we want to do. We know what we need to do. We can’t do it when we’re having to borrow money at 10% on international markets. And yes, that’s perfectly understandable. Part of that is out of anyone’s control because it’s just the nature of monetary policy cycles right now. But there remains a big finance gap. And we have to find ways for multilateral institutions like the World Bank to do more in terms of mobilizing capital. But it’s not just on the shoulders of, let’s say, the World Bank. Organizations like that also have to leverage the private sector that’s got multiple, multiple times the capital to move to climate opportunities, especially in the developing world. So how do we de-risk that? How do we imagine new ways to take the world’s savings and channel them into climate investments, especially in the places that need it most? COP also continues to be largely a supply side conversation. It’s about the supply of energy, the supply of food products, the supply of buildings, and not enough focus in my mind on the demand side. What can we all do as citizens? What should we all do as citizens, as consumers, as investors to help the world transition faster? So it’s fine to have our governments there making these declarations, but no government can force people to behave differently, to drive or eat differently. And maybe there’s a role for COP, especially in this virtual world, not just to be a conference of 100,000 people, but to be a coming together of millions and millions of people, even in virtual ways, to come to grips with the decisions, the big ones, but also the little ones that each of us makes on a a daily and hourly basis. Speaker 1 [00:16:58] Well, that might be one of the hardest challenges that exists, how to overcome our own behaviour and change what we have grown so used to. John, this has been such an excellent conversation. It was great to be back on the pod with you. Thank you for sharing all of your insights. And I guess I’ll see you around the office. Speaker 2 [00:17:16] Theresa, it’s great to have you on the podcast. Please come back. That’s our last episode for 2023. On behalf of all of us here at Disruptors, have a safe and happy holiday and please join us again in the New Year. Until then, I’m John Stackhouse and this is Disruptors, an RBC podcast. Speaker 3 [00:17:42] Disruptors and RBC podcast is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. For more Disruptors content, visit RBC.com/disruptors and leave us a five-star rating, if you like our show.

Speaker 1 [00:00:02] Hi, it’s John here. As you may have heard on our first episode, AI is going to be a theme right through the season. It’s transforming every sector and every part of the country, and we’re excited to learn where the opportunities are, as well as where the dangers may lie. And so we’re pleased to present this special bonus episode of Disruptors to you. It’s an edited recording of a recent session of the Business and Higher Education Roundtable hosted here in Toronto. The roundtable represents some of Canada’s biggest employers and leading educators and tackles some of the most pressing issues facing Canadian prosperity. The Roundtable’s recent annual meeting focused on AI and kicked off with a special presentation from Joel Blit, Associate Professor of Economics at the University of Waterloo. It’s called Navigating the AI Revolution. You’ll also hear highlights of a panel discussion with Dave McKay, RBC CEO, Anthony Viel, CEO of Deloitte Canada, and Mara Lederman, COO of Signal One, a leading AI start-up. The conversation, hosted by Valerie Walker, the roundtable’s CEO focused on several themes, including the hype around AI, workforce implications, the practicality of adoption, ethics and accuracy, and Canada’s challenges in becoming a global leader in AI applications, as well as AI research. Have a listen and let us know what you think. Speaker 2 [00:01:32] Today, I want to talk to you about AI and how AI is going to basically change the economy, and even more so, going to change the world. But more importantly, I want to talk to you about what the opportunities are going to be for you, for your organization, and hopefully also for our country. So I’m going to start by talking about what I think is Canada’s grand challenge at this point in time. But then I’m going to start talking about what the big opportunity is to change the trajectory. Specifically, I’ll talk about AI but before I get there, I want to go back in history a little bit and talk about other general purpose technologies, because they’re going to give us some insights as to how AI itself is going to be developed, is going to develop over time, is going to be adopted, and the opportunities that it’s going to bring to us if we grab them. Okay, so that’s the lay of the land. Because this group really cares about jobs and skills, I’m going to have a few things to say about that at the end as well. [2:23] Okay. So let’s start with Canada’s challenge. Obviously, the challenge that I’m speaking about is Canada’s innovation, productivity and growth gap. What I have here, I’m showing you Canada’s labour productivity and that of the other G7 countries over the last half century. Right. Or last 50 years. And specifically what I’m doing is I’ve normalized all of them at the year 1970 to be 100. And so I’m showing you the growth in productivity over the last 50 years. And what you can see is that Canada’s growth is dead last over this period. Now, there’s many reasons for that. The industrial mix, the fact that we’re not investing as much in technology, some would say that our managers are not as sophisticated as in the US, but by and large I would argue that it’s a lack of R&D and a lack of innovation. So the culprit, lack of business R&D, if you look at R&D intensity, what you see is that Canada again is dead last. It actually gets worse than that. This is R&D intensity by business, right? So government actually does a decent job, but it gets worse than that because we’re actually the only G7 country that has actually decreased their R&D intensity over the last 20 years. Now, it won’t surprise you then that we’re also dead last when it comes to innovation as measured by Triadic patents. We’re tied with Italy in this regard. And so if you put this together, of course, we’re not going to be doing all that well in terms of economic growth. And maybe the biggest thing that I worry about is the things that us Canadians we identify with, which is our public services. So things like our quality health care, public health, our quality public education, those are very things that are going to be at risk. We may not be able to afford them unless we change the trajectory. And so that’s fundamentally what we’re talking about. It’s almost an existential threat to how we identify as Canadians. All right. So bad news over. [4:07] So there were several articles in The Economist last week saying how AI is going to accelerate science, scientific research, accelerate innovation. It’s going to help us solve climate change, is going to help cure disease, all of which I think are to a large extent true. But we also hear about the end of work and we also hear about an existential threat to humanity itself. So I am going to talk about AI in a second. As I said before that I want to go back into history and look at other general purpose technologies, because I think that they have a lot to tell us about how we can ground the opportunities of AI. So when I talk about general purpose technologies, as economists, what we mean is technologies like the steam engine, like electricity, like computers and the ICT revolution. And these technologies all have three things in common. Right? So the first is that they’re pervasive. And by that, I mean that they’re not just going to be in one sector of the economy or one industry. They’re not going to have just one application. They’re going to be broad based in a whole bunch of different areas. The second thing is that they undergo ongoing improvement. So it’s not a technology that is going to arrive and be fixed and therefore deployed. It’s constantly going to be improving, getting better and changing. And the last one, which is also really important, is, it is subject to innovation, complementarities. And what I mean by that is that these technologies are not just evolving themselves. There’s complementary technologies that are evolving as well, and there’s an interplay between them. So all of these characteristics imply, first of all, that general purpose technologies are going to be transformational. They’re going to have a huge impact on society. They’re going to change things. I’m sure all of you knew that before. But the other thing is that it usually takes decades to truly feel the impact. And so that’s the first lesson, right, is that it takes time. And so we shouldn’t expect too much in the short run. But the other lesson from history, I think is even more important is that the adoption of this technology is going to follow a fairly predetermined path. And so this I call the three phases of adoption or the three Rs. [6:02] And so in the first phase, you have that the new technology is displacing old technology. But crucially, the processes, the business models, they all stay the same. It’s just that the technology is replacing the old technology in specific tasks where those technologies are being used. It’s the second phase that I call the reimagine phase, where the processes themselves, the business models, are fundamentally shaken up because they’re reimagined around the new technology, around the capabilities of new technology, where you see a lot of product even grew as you see the economy and society being shaken and things coming out the other side a lot different. The third phase of adoption, is recombine, we’re not going to focus so much on this one today, Right, because that is further in the future. But recombine is where the technology combines with other technologies to create entirely new technologies. So the example I want to use here is electricity. If you go to the late 1800s, you had these factories. They were all powered by the steam engine, right? And you had one big steam engine there and you had a lot of different stations in the factory. And each one of those stations had to be connected by a line shaft to the single power source. Now, if you fast forward a couple of decades now, we started getting the electric engine. But fundamentally, you can see that the factory layout is the exact same. Okay. Now, that brought some brighter improvements because the electric engine is a little bit cheaper to run, it’s more reliable, etc., but relatively minor. Now, it took another 20 years until people realize, hey, wait a second, With electricity, I can fundamentally reimagine the way that I structure my factory. And so specifically, you could now have at every workstation, a little electric engine. And that meant that now you could organize the factory floor in a much more logical way where the output from one station became the inputs of the next station and then the recombine phase. Of course, we know that electricity, combined with advanced materials, created transistors, semiconductor chips, telecommunications, etc. etc. In the interest of time, I won’t go into too many other examples, but at least let me talk about computers for a second, at least fairly quickly. Right. If we back up to 1987, computers have been around for a couple of decades, and yet they really weren’t having a macro impact. They were nowhere in the productivity statistics. It was known as the computers productivity paradox. It was the machine of the year, but yet there was no sort of macro impact. And the reason, of course, was that people were using it a little bit, but they were still stuck in phase one. So in the first phase, computers replaced human computers. Right. So the term computer is actually used to refer to people that sat at desks and did arithmetic all day. Right. And then we had electronic computers, obviously that replaced them, but they also replaced a lot of people in the back office, bookkeepers, clerks, etc., etc. Okay. But the business models, the way that firms are organized, really didn’t change. It was only until the second phase re-imagine where now we start to see the decentralization of corporations. So with computers you can maintain better control. We saw companies venturing abroad because again, with better communications you could now communicate over larger distances. And we started seeing new models like customer relationship management, where you can start organizing a business around customer segments, for example. Right. And of course the computer combined with our technology, you got the Internet, smartphones, etc.. [9:25] And now the question is how does this apply to AI? Let’s start with very high level and then we’re going to do a bit of a deep dive into each of these different phases. Okay. But at a very high level. Your job as an executive, as an organizational leader, is to move your organization as quickly and responsibly but as quickly as possible through these phases. Right. And so phase one, you need to be thinking, okay, how can I drive efficiencies? And this is going to result in things like cost cutting, increasing volume, increasing quality. But then at the same time as you’re doing that, you have to be thinking, okay, I know what’s coming down the line, eventually people are going to dream up of how can I do things fundamentally different using this technology, right? So phase two, the re-imagine phase. And as a leader, you need to be thinking along those lines as well. Maybe you need to be leading in being the organization that actually does it before someone else does it and disrupts you. [10:26] As you’re doing all of this, of course, you need to have your eye on the horizon. You need to have a scan function that is actually say, okay, well, how is this technology going combined with other things, in this case AI, to create entirely new things, entirely new technologies that are going to, again, fundamentally, radically change everything. So let us talk about replace, in order to think about what you can actually replace and do more efficiently. You have to understand what the technology can actually do. And so what do large language models do? Well, they’re very good at writing. They’re very good at ideation, they’re very good at background research, coding, at data analysis, and to some extent also math. And the crazy thing is that this list seems to be expanding every other week. Right. And they seem to be doing all of these things better and better. So you want to engage in phase one, you want to engage in the replace phase. Well, the first thing to do is. All right, well, let me look at my workflows, let me look at my processes. Let me break those down into tasks and then let me see which of those tasks are things that the AI can do. If it’s a task that the AI can do, let me do a return on investment analysis. And then starting at the top of my ROI list, I’m just going to start knocking them off one by one by one and automate more of my process. Okay. I want to point out that it sounds like the AI is just coming in and you’re getting rid of people. You’re dumping in AI. Obviously it’s not going to be that simple. What is going to happen in most cases is that the person is going to start working with the AI, right? And so this is where some people make the distinction between labour augmenting versus labour displacing. Personally, I think that’s a bit of a false dichotomy because what’s going to happen is if it is labour augmenting, the person is going to be able to be twice as efficient, get twice as much done in an hour and less demand for whatever they’re doing increases two fold. You’re not going to need as many workers. And so even if it is purely human enhancing, which by the way, I think it mostly is, there are going to be some job losses and there really is no other way around it. Now, a lot of what I’m saying today is I want to get you guys out of the replace phase and really thinking about phase two, because that’s where the real changes are going to happen. But for AI, I want to point out that there actually begins to be had just from this phase alone, which is actually relatively easy in the grand scheme of things. And so this is some early evidence of what these gains that can be had are. Right. So there’s a paper that shows that in writing tasks, you can increase productivity so the speed of writing with the use of ChatGPT by 59%. In the area of programming, you can increase coding speed by 56%. In customer service, you can increase the number of cases resolved by 14%. And even in the health care sector, chat bots seem to be offering better responses to customer queries than doctors do. And here’s the kicker, their responses have also been judged to be a lot more empathetic. Yes. One other thing I want to mention here is, to a large extent, these technologies are helping the least skilled. So if you are a phenomenal writer, these technologies are not going to help you much. If you’re a relatively weak writer, they’re going to help you a lot. They level out the playing field. Okay. All right. So this is the replace phase. And now we get to the re-imagine phase. I know what you’re all hoping. You’re all hoping I’m going to tell you exactly how you can re-imagine your own corporation, your own organization. I can’t do that because you are the experts on your organization. I certainly have some thoughts across different industries. What I’m going to do instead, I’m going to give you some examples. If we go back to the last sort of big technology, I would argue it’s the internet. You might argue it’s mobile technology, but let’s go with the Internet. We saw three really big companies come out of that age, Right. How did they come out of nowhere to become really big companies? Well, if you look at the case of Amazon, what they did is they engaged in this re-imagined phase before anyone else. And if you look at Meta, they did the same thing when it came to social networks and how people interact with each other. Okay. Phase three, in phase three, again, I’m not going to talk very much about it, but these technologies have combined to create entirely new things. So, for example, A.I. Robotics, 5G and Iot are combined to create collaborative robots. These are going to be entities that have the cognitive capabilities and the flexible sort of physical capabilities and are going to be connected to the Internet. You’re going to have access to everything. They’re really going to change everything. Right? But of course, that’s a good ways off. All right. So let me just say a couple of things about the impact of jobs. I think this framework I led you guys through helps us to also think about what the impact on jobs are going to be. And specifically in the replace phase, it’s actually fairly predictable. Because all we need to do is we need to ask which jobs have. So we look at all the tasks that are involved in each of these different jobs. And some jobs are going to have the majority of their tasks being things that these technologies can do. Those jobs are going to be in trouble. Other jobs, not so much because these technologies, you still need humans in the loop for now. When you go to the reimagine phase, at that point, it’s really hard to say. So, for example, I could never have predicted that the Internet was going to get rid of retail jobs. It wasn’t clear there was no link there until Amazon fundamentally redefined the industry. It wasn’t like oh these, you know, the Internet, the kinds of tasks that these people know that that wasn’t the analysis at all. So it’s really hard at that point to see what’s going to happen. But I would say one thing as well about winners and losers and about skills. I think society has a tremendous opportunity for organizations, for a country. But we can’t forget that there’s going to be winners and losers. Not everyone is going to be affected equally. And so I think it’s important for us to keep that in mind and make sure we have in place the kinds of programs that can help everyone. So who are going to be the winners and losers? Well, it basically depends whether your skills are complementary to AI or whether AI is going to replace those skills, whether it can do those skills. So what are some of the complementary skills? Things like and entrepreneurial skills. If you’re an entrepreneur and you have ideas, you are now super empowered. You can use these technologies to implement all kinds of things quickly. On the other hand, things like writing, background research, reading and programming, those are going to be competing with AI. So that’s all I want to say for that. In the interest of time, I’m just going to conclude and share with you what I think are some of the key takeaways. I think we really are at an inflection point here where we have a technology that’s going to transform our economy and our society. And for all of you that are leading organizations, it’s an opportunity to increase efficiencies, in other words, to, you know, focus on phase one. But you should really see that only as a tip of the iceberg. You really need to be thinking about phase two. In other words, there’s a once in a generation, maybe once in a lifetime even, opportunity to really transform your business. And if you’re really ambitious, actually your industry. And the question is, who’s going to do it? Right now, I started to talk by saying in Canada, we have a real problem here. We need to address it. We need to change the trajectory. But to do that we’re going to need our small and medium and large organizations to engage in these first two phases. And of course, that’s not going to be easy because they’re running all the time and don’t have the capacity. They might not, not know about AI. I think there’s a big role here for higher ed and for government to get involved, make sure that happens. My dream is there’s going to be the next Amazon, Google or Meta of the AI age is going to be coming out at some point and I want them to be Canadian, at least one of them to be Canadian. Okay, so one parting note. And I think this is especially relevant for higher education institutions. We really have not changed much in the way we do things in many, many years. If you’re not willing to be a disruptor, then you better be prepared to be disrupted. So I’ll stop there. Thanks so much. [18:31] Speaker 3 [00:18:39] Felt like Joel kind of threw down the gauntlet there for the post-secondary folks in the room. That’s amazing. Joel, thank you. Thank you. I’m really pleased now to invite our esteemed panellists to stage. You already know Dave McKay. Dave BHER’s biggest champion, Anthony Viel, who goes by AV. Here, he’s the CEO of Deloitte Canada. Deloitte just put out two days ago a big report on the impact and opportunities of Canada’s AI ecosystem. And last but certainly not least, Mara Lederman. Mara is the chief operating officer and co-founder of Signal One, and prior to Signal one, Mara was a professor at the University of Toronto Rotman School of Business and was one of the leads of the Toronto site for the Creative Destruction Lab. I am so thrilled to have you up here. I could just maybe get everyone to give them a real round of applause to get them excited about talking. And I think my first question and I’m going to throw it open to all of you is just to like, what did you think about what Joel said? How are you feeling now? Speaker 4 [00:19:40] So it was a great presentation. And, you know, I think Joel brought to life everything that economics has been thinking about, you know, not just in terms of A.I., but really drawing on the history of what have we seen as the patterns from technology innovations in the past. If you had asked me a year and a half ago, I would have said, I absolutely agree with everything Joel said. Now I would qualify that. I absolutely agree that the field of economics says everything that Joel told you that it said. And when, as Joel said, the returns to the replace phase are kind of small, they’re not nothing, but they’re not as big as the transform phase. It’s like, why am I going to do all that work for something that might be small? So then you’re like, Well, I can give you this big idea. Transforming. I’m definitely not doing that work. And so I think that’s probably, you know, the what I can offer is there are so much under the hood there that makes this so, so very hard, even when all of the intentions and the incentives are in the right place. Speaker 3 [20:37] AV that’s a good segway to you. You can speak to it. Speaker 5 [00:20:38] I was inspired and enthusiastic about what Joel was talking about and why I am. I believe that the reimagine phase is going to create jobs. We digitized all the analogue and we did that for a good 15 years for returns, good returns, good efficiencies for sure. We haven’t really grasped that re-imagine phase yet with digital, let alone AI, but digital and the opportunities it presents itself. So it’s going to take a long time. I think the message that you had in your presentation don’t be lulled into inaction, and that’s our message at Deloitte. Speaker 3 [00:21:50] Deloitte put out a report just a couple of days ago. What were the main themes, the key takeaways for you that came out of that assessment of Canada’s AI ecosystems? Speaker 5 [00:21:58] I think that the headline statement is 86% of Canadian organizations are worried about the risks of privacy, confidentiality, biases, poor quality results. They’re all legit and they’re all in this first phase. I’m not talking about iRobot taking over the world and we become enslavement to technology. I think that’s something we can talk about in the decades to come. But immediately, you know, the privacy part is legitimate concern on that. The poor quality results, the hallucinations, but also the model deterioration. The ChatGPT4 in some tasks is worse than ChatGPT 1. And nobody can explain why. So there’s a legitimate, legitimate concerns that I think back up that 86% of respondents are worried about the risks. Speaker 3 [00:22:24] We have three executives from companies up here. My question is, you know, we’ve got a room full of companies and post-secondaries. When you’re thinking about some of these barriers, if it’s still adoption around digital tech or adoption or at least understanding of the potential of AI, generative AI, in particular. When and how do you think about post secondaries and how you would want to work with them now? How have you worked with them? Where do you see that relationship going? Speaker 4 [00:22:50] So I can start I mean, I think there are such an incredible roles, our partnership for partnerships between post-secondary and between enterprise. I think I would have said in the past that post-secondary does the research somewhere in the middle we have programs like CDL to help with the commercialization and then we sell it to large enterprises. That’s too small a view. There is this huge part I’ve learnt in the middle that goes from the research to the development. I think where that development part which is so, so much part of the commercialization has to be done in partnership with potential customers and that’s something I didn’t even appreciate what I saw all these startups from CDL and say, okay, the next eight weeks get one kind of a customer. But what we realize is like, you can’t build a product for a technology product for your customer just as the technology company. You need to be almost embedded and working closely with your customer to understand all of your blind spots to what practically needs, you know, to work to make it work. So I think that’s one form of partnership that so far we need to bring more enterprises. We do this at our company. With our first two hospitals we’re design partners and that meant something very specific. We knew right from the outset, you’re getting something that’s unproven. Right? Now, you’re getting some great deals in terms of that. But here’s all the stuff you’re going to help us with, and they are effectively co-designing the technology with us. So I think that’s kind of on the development side, so much opportunity. The other thing I learned is on these areas, like the risks you talked about, we need the research on the cutting edge, thinking aright around algorithmic bias, how do we regulate these things? But even that needs to be paired with doing it in practice, right? So much of what we do around model validation, retraining, monitoring borrowed from what my co-founder did when he built a AI inside of one of the other leading banks. He never would have figured that out. You know, in graduate school, it was the need to put it into practice in a in a regulated industry, in an organization with very strong risk management practices, that they’re like, okay, how do we figure out to take what the computer scientists have taught us and turn it actually into technology that can do this? So I think that’s the second place where higher education and enterprise really need to work hand in hand, specifically around A.I. Speaker 3 [25:09] Dave I throw that same question to you and the relationship and partnership potential that exists here. Speaker 6 [00:25:16] One of those use cases we’ve already started to re-imagine, and this is where we need university help, and that is the coding one — that you pointed out. So we’ve already challenged ourselves to solve a major problem in our company, and that is we’ve lost control of our tech stack to third party software providers. So, our big idea is if I can code software 75 to 80% cheaper than I did before, then I’m going to get back in the game that I was doing 25 years ago of coding my own software. That’s the reimagine. And I want it and I’ll fund it. So you can see the disruption. And every other CEO of every other major company wants the same thing. But controlling the code is going to be really critical. So what do we do? We’ll bring more co-op students in and get us to 75% ChatGPT code. Then I need a systems design person to architect the system and then we’ll code it ourselves really efficiently — and I don’t have to pay that economic rent. Billions and billions of dollars a year. So that re-imagine, I think it is that two-to-three-year horizon as well. Maybe five, maybe ten. But we’ll start on it now. Anyway, that’s an example of how exciting this technology is and kind of rethinking the world and why we’re going to need students who have broken that bias to rethink the world. [90.6s] Speaker 3 [00:26:46] So you’ve heard it here first, folks. Dave’s getting back into coding, so that’s sort of my takeaway. Speaker 6 [00:26:55] [00:27:35]Always a coder. Started a coder, will finish as a coder — full circle. [4.6s] Speaker 3 [00:26:59] AV, I saw you nodding and taking some notes. I’m going to ask you to build on that and then I’m giving you guys a heads up. I’m coming out to the audience. This is where we pivot into the panel and audience conversation. [00:27:50] Speaker 5 [00:27:10] I think Dave’s point, augmenting human and technology is a good strategy and you should continue to do that develop through your programs. The folks that are not scared of technology embrace technology. [27:25] And if I could pick up just my point earlier as well as is, I get really nervous when people in Deloitte start innovating too far away from the end user, the client, the patient, what have you. I think we shouldn’t forget that. And purple people are the ones that can get to the to the crux of that. But I agree with Dave too, that white collar productivity has been terrible for 40, 50 years. Terrible. And this is an opportunity and where we can get some productivity and white collar and I think it’s continued around this area, leveraging and augmenting technology that’s going to be able to do that. Audience [28:05] In the field of of AI, you know, because we’re talking a lot about how we marry the education to ensure that we’re ready to actually tackle that. I know we’re talking a lot about college and university, but I actually challenge that. I think we need to start we need to start in the schools with Gen AI right now, like when I think about when I was developing code 30 years ago, it was horrendous. It was like, you know. See And was not the most easy thing to do right now. Now you can start to teach kids from school to actually prompt code so they can create code. If we wait for college and university, we’re coming too late. The other thing I find that we have to think about is, is AI, where we’re going to focus. So when I look at other countries, you know, just quick examples. If I look at India, they decided long time ago they were going to focus on IT and there was government grants, there was like the whole thing channel on how they will become the best country to actually have IT and they did it. So is AI our focus? And if that is our focus, what are we going to do to ensure that, as India did, what it or many other countries very decisively shows what they’re going to be good at? We’re going to get to it because we’re going to have to start in every different angle to get to. So I’m not even convinced yet that as a country, we’re very clear on that yet. We want to be good at so many things, but you cannot be good at everything. Speaker 5 [00:29:32] One of the outcomes of our research, if I may, we found that one in ten of the leading gen AI researchers reside in Canada today, and we’ve grown that talent around those luminaries, if you will, faster than any other G-7. Now, whether we deploy that, whether we keep them in-country, whether we through incentives and otherwise, I think is over to you said, you know, government’s got a role to play here as well to do that. How do we make Canada an attractive proposition for those talents? Audience [00:30:05] Indeed, it was used to add something quick, like one of the things that is a little bit painful is a lot of the fathers of AI are Canadian. How many big companies do we have in Canada right now at a global stage? Zero, which is really painful. Speaker 6 [00:30:25] A question for the educators. I think it’s really important, are you flipping your educational methodology on its head and starting with the output from the machine, then asking your students to validate it and the research and the learning is how do you prove true or false, and what’s the quality of that answer? I mean, is that something that you’re talking about and thinking about? Audience [00:30:52] Yes, absolutely. I just came back from a week in Sydney at the Times Higher Education World Academic Summit, where in fact, much of the agenda was devoted to this question of how we prepare our students for a world, a working world in which gen AI is going to be a routine tool that they’ll be using. The issue of prompt engineering came up, and I think it was agreed that we could probably come up with a better label, maybe prompt design or prompt creation, because, you know, it speaks exactly with the skill set that’s actually going to be required in order to do this well. So I wanted to come back to a wonderful case study. You know, your experience and the difficulty that you’re encountering and you know, you emphasize the importance of connecting technology users and technology producers together in a kind of co-creation process, which we’re not very used to doing in this country. You know, the undeniable kind of sorry track record that we have in this country of business enterprises being very slow to adopt technologies that would enhance their productivity, I would say also slow to embrace a training agenda, which is a complementary input that one requires in order to make use of new technologies so effectively. So, chronically, we have underinvested in training and we’ve also seen businesses undervaluing and the importance of investments in the fixed capital that is at the cutting edge. And so, you know, the question it raises is how do we change the demand side of this, this process? How do we get more enterprises to do what RBC is doing and help them to understand not just the opportunities but the threats? Because if they don’t recognize the importance of making these kinds of investments, they’re not going to survive very long. So I welcome comments from all of you on that particular issue and just say that this session today has done a fantastic job of zooming in on, I think the number one challenge that the Canadian economy is going to be facing in the next little while. Speaker 4 [00:33:07] So I think the first thing is nothing, nothing like a crisis gets people to do stuff. And I would guess Vivek and others might know this better. There was probably incredible collaboration between academia and health care systems during COVID, and ideas probably went from research to implementation sort of faster than has ever happened before, right? So it is certainly possible when it is necessary. So then that asks the question, well, why isn’t it happening the rest of the time? And I have a few ideas on it. I think on the demand side, I think personally I think we have a lot of industries that aren’t sufficiently competitive and we’re not that big a market. I mean, if we had a ton of, you know, have tons of regional banks, right? We don’t have a ton of banks. We don’t have a ton of airlines that we could count them on less than one hand. And so I think obviously competition is a threat to keep getting better. And there are some industries I think don’t have enough competition. We don’t have probably as much competition for talent in Canada as we should. Our MBA students overwhelmingly wanted to stay in Canada. Now that is great for the Canadian employers and a huge fraction of them went to the big banks. And I love that you hire our students, but I wish you hired them away from them wanting to go to the US. And then it’s hard for all the reasons people here have said it’s hard absorptive capacity training. People are busy, right? They don’t have a lot of time on middle of doing their jobs to do things. And now the last point I’ve spoken too much. Just coming back to your point about transformation, I can’t think of an example where the true transformation around a new technology, now I could be wrong, came from an incumbent. So what are the ones where we think of new technologies transform business. Amazon transformed retail; start-up. Uber transformed transportation; start-up. Netflix transformed entertainment. It wasn’t Blockbuster, all of a sudden say, we’re going to close every store, right? And so maybe, Joel’s probably thought about whether there is or there isn’t. But part of why this is hard, you know, I want to transform an emergency department. That’s not going to happen for 20 years. Amazon’s going to be more likely to do that than, you know, my technology company with some incumbent. Could you imagine if, like you said, one day we’re closing every one of our branches, That could be a transfer. Speaker 6 [00:35:26] [00:41:07] We’re disrupting ourselves.[0.3s] Speaker 4 [00:35:28] You’re disrupting yourselves. But on the scale, on the examples that Joel brought. Speaker 6 [00:] [00:35:32]Disruption is slower. [1.0s] Speaker 4 [00:35:35] The scale, the impact on the humans that you kind of care about as a leader, it’s very hard to do that. And I think that’s why it’s so hard to get to that transforming. Speaker 3 [00:35:44] This has been fantastic. A huge, huge thank you to the panel. Can I just get everyone to give our panel a round of applause. Speaker 1 [00:35:56] That was an edited recording of the annual meeting of the Business and Higher Education Roundtable held in Toronto on October 5th. And this is Disruptors, an RBC podcast. I’m John Stackhouse. Talk to you soon. Speaker 3 [00:36:15] Disruptors and RBC Podcast is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. For more Disruptors content, visit RBC dot com site Disruptors and leave us a five star rating. If you like our show.

Speaker 1 [00:00:01] Hi, it’s John here. When you hear the word market, what do you think? We know a farmer’s market is where you can buy farm fresh food. And a stock market is where you can buy stocks. And a flea market is where you can buy. Oh, never mind. You get the point. Markets are where people gather to buy and sell things of value. And those include carbon markets. Carbon markets are, in fact, all the rage in climate circles right now. And yet they’re not very well understood. So let’s start with a basic question. What on earth is a carbon market? They’re not a place to buy or sell carbon. At least not literally. But they are where investors and companies and each of us indirectly can buy a share of emissions reducing activities like tree planting or carbon capture or renewable energy production. Think of it as a place where polluters meet servers to determine the market value of climate action. The value of global carbon markets doubled in 2022 to more than $1 trillion. And when it comes to financing the climate transition, we’re going to need a lot more of these markets to take the baton from governments and move us from a tax and spend and regulate approach to more of a free market approach that truly puts an economic value on climate action. These markets have already helped finance wind farms and protected grazing lands all over the world, but they’ve also led to controversies over the quality of carbon offsets. Are all these projects really removing carbon from the atmosphere or just making us all feel good? And can the markets that are trying to price them with all that power and ingenuity actually take on the biggest challenge we’ve ever faced and mobilize the trillions of dollars that we’re going to need for all the technologies and human initiative to get us to net zero? Speaker 1 [00:01:54] This is Disruptors, an RBC podcast. I’m John Stackhouse. On today’s episode, we’re delving into the intricate web of carbon markets to explore their legitimacy, the support they offer to some of Canada’s leading innovators, and how they can mobilize those trillions that climate action is going to need, as well as their role in helping communities preserve and enhance our land, forests and water. We’ll be joined by Michael Berends, the CEO of Clear Blue Markets, to talk about the hype and reality of carbon markets. We’ll also hear from Phil DeLuna, the chief carbon officer of Deep Sky. That’s the brainchild of Fred Lalonde, the founder of Hopper. But first, let’s hear from Danni Warren, an indigenous leader who’s working with coastal First Nations in northern British Columbia, where communities are accessing carbon markets to help protect the Great Bear Rainforest. The GBR, as it’s known, is not only one of the most stunning places on the planet, its preservation is essential to Canada’s net zero ambitions. Here’s a clip from our conversation. Speaker 2 [00:03:01] The Great Bear Rainforest is located on the north and central coast of British Columbia. It’s the second largest temperate rainforest in the world. We are lucky enough to be the only indigenous owned carbon project in Canada. Carbon markets for us have opened up a massive door. It’s allowed us to protect the entirety of the project area and allowed us to bring in revenues that are helping people on the ground in community. In terms of scale, our alliance of nations that I work with is representation of eight different nations. No alliance of First Nations in Canada has been as big as we are and has sat at the table with their government and having real open ended conversations. We’ve created policies together. We’ve created acts together. We co-manage together. In terms of reconciliation, it’s massive. No other nation has been able to sign such a major sharing agreement with their government that allows them to own the assets 100% and then be able to sell them in a marketplace under their own right and their own well. And for our people, for our communities. They have that opportunity. They have the opportunity to actually be heard and to have a say, and input into how their community and their territories is really being managed. It means that we have a chair right there at the table. Speaker 1 [00:04:16] The Great Bear Forest Carbon Project is the first offset project in North America to be implemented on traditional territory with an unextinguished Aboriginal rights. Danni’s work is what carbon markets should be all about raising capital from investors and companies, determining a market value and getting that capital to people like her and communities on the front lines of climate action. Our next guest, Michael Berends, is CEO and co-founder of Clear Blue Markets. It’s an award winning carbon markets company that works on carbon product deals, structuring strategies and transactions for offsets in more than 50 countries across all sorts of sectors, including nonprofits and governments. Michael, welcome to Disruptors. Speaker 3 [00:05:02] Hi, John. Thank you very much. Really excited to talk about carbon pricing today. Speaker 1 [00:05:05] Let’s start with some basics for those who need a carbon markets 101. There are compliance markets and voluntary markets. Can you give us a quick explanation of the difference? Speaker 3 [00:05:15] Yeah, I think today a lot of what we hear being discussed is the voluntary market where you have corporate citizens looking to reduce emissions towards net zero. And that’s a lot of the discussion about offsets. However, I think what’s really driving carbon pricing over the years is the compliance markets, which are regulated by the governments and they impose a carbon price on emitters and emitters need to work within those regulations to reduce their emissions and pay a carbon price when they have to pay a carbon price. But a key part of that is that it’s a market and it’s a tradable market, and we’ve had those around for decades. The main one being the ETS, the EU, and we have those down in Canada of course, the carbon price across Canada, which we’ve seen has been very successful in driving emitters towards net-zero targets and reducing their emissions, which we need drastically today. Speaker 1 [00:05:56] Yeah, as you say, this is nothing new in large parts of Canada. Quebec and British Columbia have both been pioneers in this. Alberta has carbon pricing, industrial carbon pricing and has for a number of years. So emitters, as you say, have to pay a price for what they pollute, but then they can find offsets for that. Can you explain a bit of how that works? If I’m an emitter and polluting, how do I go about getting an offset? Speaker 3 [00:06:19] Yeah, it’s a challenge for emitters to make the reductions. We know working with emitters, it takes a while for them to make significant impacts into their installations. So offsets are activities that occur outside of a carbon pricing regime. So they their activities don’t have a carbon price such as forestry projects or bio gas projects and landfill projects that achieves the result of emission reductions and allows emitters to also comply with the regulations for a period of time. So the concept of using offsets, even for a voluntary market, is saying, I can’t make those changes today, I will make those changes. In the meantime, I’m going to use this tool called offsets where I’m going to support reductions which otherwise wouldn’t have occurred if I didn’t support that. Again, this not the long term solution. It’s a tool to get towards net zero as we look to make those reductions ourselves. Speaker 1 [00:07:01] Why would I buy an offset in the voluntary market rather than the compliance market, which sounds more sophisticated? Speaker 3 [00:07:07] In the compliance market, there’s less options available for those offsets. And the fact that they allow for only certain types of from certain locations because that program’s being able to manage it. These programs want to be have full control over the offsets and what they allow. Now, that’s one issue. I think. The other one is you’ll probably find the price is higher because the price is linked to the compliance price. It doesn’t mean it’s a better or worse. The fact is we take the view that all offset projects that we work with are coming from credible regulations and credible sources. That is, one tonne of CO2 is one tonne of CO2. So if you’re a voluntary offset buyer, there’s no reason to purchase from a compliance regime offset. There’s other offsets out there and probably other assets that are more likely linked to what you’re looking for. For example, maybe if you’re an ad company or if you’re in an oil business, you’re looking for oil sector offsets or other activities that you share, but also locations. Many of our clients have activities across the world, and they’re looking to support offset prices in those locations. So there’s different reasons why you may buy from the voluntary market. Speaker 1 [00:08:11] There course been a number of controversies, a bit of noise out there around offsets, especially over the last year as prices have gone way up. How much of that is hype and how much is reality? Speaker 3 [00:08:22] I’ll say it’s mostly hype, unfortunately. Lots of interesting stories, of course, that catch people’s attention. The voluntary market is not perfect, but I don’t think anything is perfect and will always be able to find some outliers there. But there’s no reason to blow up the system. I am extremely confident that overall even the voluntary market is doing something very good. Speaker 1 [00:08:39] So I guess a key behind all of this is what’s called measurement reporting and verification. MRV, which gives people confidence, gives them proof that what paying for actually is happening and relies on third party validation, which has always been the strength of transparent, sustainable markets over the centuries. How is that sort of approach growing when it comes to carbon markets? Speaker 3 [00:09:01] This approach and the sophistication, the technologies to do those measurements continues to increase. I can’t think of anything else that I could purchase today that I wouldn’t have so much information about that project. I can find out the location, I can find out the technology, I can find out the timing. I can find out who the owner is. The extensive amount of information available if someone wants to look into the offset projects, which I would never find for anything else, I wouldn’t find that when I buy my phone, I wouldn’t find it when I buy my car. Even the food that I buy, I wouldn’t know all the details about that. So there is this sort of contradiction about concerns about transparency, when in fact there’s more information about an offset project than you could imagine out there. Speaker 1 [00:09:35] There’s been a surge in prices as well as demand really coming out of the pandemic. What’s driving that in your mind? Speaker 3 [00:09:42] I think the pandemic brought to mind the fact that science is important and climate change is about science and accepting it. And unfortunately for many years, climate change became a political thing and not a scientific thing. And I think that changed when COVID was around and understanding. We need to understand the science behind this. And we realized that the science is telling us we’ve got a problem and this is real, this is important, and let’s do good things with the opportunities we have in front of us. And we really saw the markets, to your point, John, take off during the COVID pandemic. Speaker 1 [00:10:10] And a lot of companies, of course, are getting more serious about net zero and they’re putting significant amounts of capital into this. You just think of the Apples and Microsofts of the world or Shopify, if you’re in Canada, I think it said it’s going to put $1 billion towards these sorts of offsets. Is there as much demand from communities and that kind of supply side of projects, if I can call it that, as we’re seeing on the demand side from investors and corporates. Speaker 3 [00:10:37] Indeed, the demand for offsets was driven mainly by the ETS in the EU market. 1520 years ago they changed their rules and a lot of things changed the financial crisis, so it slowed down. Then of course the development of projects slowed down and we saw that direct lack of development as there was no price signal. But as we saw that demand come back, those companies that you mentioned and other, looking for sources that you saw the development side pick up as well. So there is the supply side. But what’s also very important to consider is as demand goes up and need for this and the price of carbon goes up, new technology will be developed and deployed to supply that demand. And that’s exactly what these markets are for. They’re there to create new technologies, new opportunities to capture emissions, for example, and that’s stimulated because of a carbon price. If we don’t have a carbon price, we won’t have those. And taking that back again to the compliance market, if there is no price signal for carbon on emissions, you won’t have these technologies being deployed in these significant industries which they cannot just stop without new technologies and this is what the price is doing. Speaker 1 [00:11:39] One of the interesting aspects of carbon markets, at least in my mind, is the uncertainty around innovation. So we hear from all sorts of innovators who are developing new technologies. Carbon capture, as you just mentioned, and we’ll hear from Deep Sky shortly about what they’re looking at. Much of it is proven, but some of it is not proven and not proven at scale. How do markets manage that kind of uncertainty? Speaker 3 [00:12:01] That’s definitely been a challenge in the carbon markets, is the certainty and it’s the regulatory certainty, the stroke of pen risk. Unfortunately, here in Canada, historically, there has been some certainly in regulation. And that has delayed investment and that is the struggle of the long-term certainty in knowing will your emission reductions be valued and can I make this investment say that I’ll get a return on five, ten, twenty years from now? That is changing. We’re seeing a lot of improvement. There’s been a Supreme Court case has show that the federal government can ensure that there’s a carbon price. That’s been great for the signals. We’ve seen a lot of our clients in large emitters make decisions after that result. And the voluntary market is a way of getting around that. That risk of uncertainty when we create our own certainty, as corporates saying we believe in this. We are committed to making investments because we know this technology is important. I’m not going to even worry too much about the compliance side. I will pay for that. But I’m committed and make making my own path. And I believe in the voluntary market and we should get rewarded for that. But we’ll invest in that. And again, also those companies you mentioned earlier on, they’re doing this as well. The Shopifys, the Amazons of Microsofts. Speaker 1 [00:13:00] Many of those operators are very sophisticated that we heard from Danni Warren earlier, talking about what they’re doing in the Great Bear Rainforest. And it’s fascinating to think of communities in remote parts of Canada and elsewhere in the world doing remarkable things and being rewarded for that through carbon markets. What do communities like that need to think about when they think about global carbon markets and how they can benefit from them? Speaker 3 [00:13:25] I’m glad you raised this. I’ve been fortunate enough to travel the world and have amazing experiences, but also to be there and talk about carbon pricing. And if there weren’t these markets, we would not be talking about carbon pricing and more importantly, we would not be looking at projects that reduce carbon and those communities throughout the world that are not sophisticated because that’s not their core business, but they’re looking for these opportunities. They need the support to understand that what is the market? They need strong partners to say this is how you can develop and get the most value out of your project to ensure that project is created. But again, that comes all back to the fact that there is a carbon price, a carbon signal, and there’s this incentive for things such as offsets to fight this climate crisis. Speaker 1 [00:14:07] Michael, you’ve got a great global perch and through Clear Blue you see all sorts of companies and sectors. I wonder when you think about the year ahead or the years ahead, what you think needs to change most? What kind of innovations or developments are going to be most needed in carbon markets for them to continue to grow and succeed? Speaker 3 [00:14:27] Yeah. As much as we and the co-founders have been doing this for 15 years, I feel like we’re just beginning and what needs to be done is one, I think the first thing is still get that regulatory certainty so these technologies can develop. I’d say the technologies are there today to make significant impacts. They just need to be deployed and needs to be trust in what we’re doing. To do that, we look at developing countries that didn’t cause the problem that the West caused this climate change problem by their economic growth. And we must allow other countries that are still developing to have that same economic growth. And one way to have them do that, but also not cause the same problem, is to help them avoid emissions, to say, look, maybe don’t build a coal plant, build the wind farm and we’ll give you an incentive so technologies will come. But we do have the technologies today that makes it difficult impacts. Speaker 1 [00:15:09] That’s a great note to wrap up on, Michael. Incentives often drive innovation. Thank you for being on Disruptors. Speaker 3 [00:15:15] Thank you very much. It’s a pleasure. Speaker 1 [00:15:19] That was Michael Berends, the CEO and co-founder of Clear Blue Markets. Our next guest is Phil De Luna, chief carbon scientist and head of engineering at Deep Sky. It’s a Canadian clean tech company aiming to remove gigatons of CO2 from the atmosphere while building infrastructure to scale carbon dioxide removal systems in a tangible way. Phil, welcome to Disruptors. Speaker 4 [00:15:47] Thank you so much for having me. Speaker 1 [00:15:48] You’ve had a remarkable career and it’s really just getting going. You’ve worked at Toyota and IBM. I think you were Canada’s youngest research director at the National Research Council. Now, you’re chief carbon scientist at Deep Sky. That’s a Montreal startup that just raised $55 million from VC investors. White Cap and Bright Sparks, the venture arm of the Ontario Municipal Employees Retirement System, or Omers, as people may know it better. But Phil, what I love most about your bio is you call yourself a research capitalist. What is that? Speaker 4 [00:16:20] Yeah, it’s a little term that I came up from myself. You hear about venture capitalists all the time and what do they do? They identify and find companies to invest in, to create value, to drive disruption. I think of my career as looking at how do we use science and research and innovation to drive disruption. And so when I was at the NRC, I was essentially overseeing a portfolio of programs to disperse public funding to help innovation. When I was at McKinsey, I led carbon tech for the sustainability practice in Toronto. And I was helping investors, incumbents and innovators deploy capital to turn innovation into action. And now I’m at Deep Sky, where I get to essentially find the best technologies in the world to capture CO2 from the air in the ocean. And then I get to bring them to Canada and scale them. So it’s about as good of a term as I could find to describe my career. Speaker 1 [00:17:14] It’s a beautiful description, and I’m just thinking venture capitalists meet research capitalists. That’s a great intersection. Carbon capture, maybe the hottest tech out there as it allows us to take carbon either out of the air or to capture it at source. Phil, wonder if you can tell us a bit about Deep Sky’s research vision and what you’re hoping to achieve in this great kind of space race of carbon capture that we’re seeing all over the world. Speaker 4 [00:17:41] Yeah, for sure. I always like to use the analogy and to describe the nuance between point source capture, which is capturing it out of flue stack at a steel mill versus what we’re doing, which is carbon removals. And the difference is imagine that the atmosphere is a bathtub and CO2 is water and it’s overflowing. You have about two that overflow and you can do two things. You either turn off the top or you pull the plug. Point source emissions is turning off the tap, pulling the plug. That’s what we do. That’s carbon removal. And the reason why we need to do this is that there is a very sizable amount of our economy that is impossible or difficult to electrify. Transportation, cement production, steel production. And then on top of that, there is a lag with warming and emissions. I often liken climate change and COVID and the pandemic to be very similar. Both have lagging indicators. In the pandemic, a death was a lagging indicator of infection, a lag time of two weeks. In climate change, temperature rise is a lagging indicator of emissions. But the difference is it’s decades. Just because we stop emitting completely. The world still has this baked in warming, 10 to 50 years worth more warming. Now, that’s why we have to remove CO2 from the air. So I wanted to start with that before I dove into what Deep Sky is doing. We are a technology agnostic, project developer and owner operator of the infrastructure to remove CO2 from our air and from our ocean. We don’t develop the capture tech ourselves. We develop the projects and the plants. We looked around and we said there are no technology agnostic project developers in the market. We are going to service that need. And that’s exactly what we’re doing. Speaker 1 [00:19:24] This sounds in many ways like a basic matching service, which we see all the time in our lives. Whether it’s for travel or finding hotels, is just matching supply and demand as efficiently as possible. And then no surprise that Deep Sky grew out of Hopper, which is Fred Lalonde, a great Montreal innovator and disruptor who we’ve had on the show in the past. Hopper is the back end of a lot of what we all participate in, which is buying airline tickets. Connect those dots for us. How did the group go from Hopper to Deep Sky? Speaker 4 [00:19:56] Yeah, it’s a great story. So Fred Lalonde and Joost Ouwerkerk, who are the co-founders of Hopper, a few years ago started offsetting the emissions of their customers by planting trees. They planted, I think, over 30 million trees over three years. And they got criticized by activists saying, oh, this is greenwashing, this isn’t enough. And this was around the pandemic. So they had some a little bit of extra time to dive deeper into climate. And the deeper that they dove, the more scared they got. And they realized two things. Number one is that all of the models that we use to predict how warming will happen, are wrong. They don’t take into account tipping points. These are these one way doors that once you cross them, it’s very difficult to come back. An example being once the Antarctic ice sheet melts, it’s not going to come back tomorrow. If we stop emissions, it takes millions of years for that ice sheet to grow. That’s a one way door. That’s a tipping point. So they realized, one, that climate models are wrong. Two, planting trees is not enough. We actually have to remove carbon dioxide from our atmosphere, mechanically. Trees take 10, 30, 40 years to reach maturity before they really start pulling CO2 out of the air. And so, there are many reasons why we should plant trees and we should continue planting trees for environmental reasons, for habitat restoration, reasons for ecosystems and biodiversity. But emissions reduction probably isn’t the best way to do it. Speaker 1 [00:21:21] Phil, as you said earlier, there is a lot of debate about the energy required to take carbon out of the atmosphere. You’re a scientist. Help us laypeople understand the math of using all that energy. And does that really net out in a positive way that’s worth all the investment that’s going to be required? Speaker 4 [00:21:40] So the first point is that the only way you can do any of this is if we have renewable electricity, low carbon or low carbon electricity. So it’s solar, that’s wind, that’s nuclear. The second piece is that every new technology has iterations. They always start way off, way less efficient than they become. So a lot of folks who say, oh, carbon removals or direct air capture technology is super energy intensive and it will never scale. They’re assuming that it’s going to scale at just this energy intensity. The first generation of carbon removal technologies rely on heat really, really high heat. So what we’re doing at Deep Sky is we’re looking for technologies that don’t need heat or if they do need heat, they only needs low grade or heat that can be produced with electricity. So the number one thing that we’re looking for in technologies that we bring to Canada is can it be electrified? The second thing is, is there a pathway to low energy intensity? To give you a sense. The current technologies that rely on heat are about 4000 kilowatt hours per ton of CO2. So it’s a measure of energy per ton of CO2 captured. We want to find technologies that are a quarter of that 1000 kilowatt hours per ton of CO2. Once you find these technologies and once you scale them, once you start getting down that cost curve by deployment, then not only does it become more economically advantageous, but it also increases energy efficiency. Speaker 1 [00:23:01] Phil, you’re a materials guy, and I’d like to pick your brain a bit about all the assets that we have in the world to capture and store carbon. But the company is called Deep Sky. So let’s start there. Why is Sky in the name? Speaker 4 [00:23:15] Really there are a couple of thoughts storing CO2 deep underground, taking the carbon and storing it back to where we found it. So that’s the deep part. And then the sky is removing it from the sky, yes. But also, thinking about the vastness of our atmosphere of what we want to do to protect it. It just felt like a good marriage. Speaker 1 [00:23:36] That is a good marriage. Tell us about the power of both rocks and sea, because Canada’s got access to a lot of rocks and a lot of sea. So how do we harness those to get carbon out of the sky and deep into the earth where maybe it belongs? Speaker 4 [00:23:51] So to answer this question, I have to take a step back and talk about our natural carbon cycle. If there were no humans in the world, and if there was no industrial activity, there would still be CO2 that goes from the ground into the air, into the water, into the ground, into the air, into the water. That’s our natural carbon cycle. Rocks play a role. Ocean plays a role. Rocks, for example, deep underground, there are these reactive minerals that when they get exposed, react with the air. I’ll give you an example. Limestone, everything that we use for cement and building everything, the calcium in the ground, which is a metal, when it hits the air, it reacts with CO2 and it forms calcium carbonate limestone. That natural capturing of CO2 by a rock, we can engineer that. We can create reactors that do that faster by playing around with the size of the rock so there’s more surface area so they can touch more CO2, so we can grab it. On the ocean, a lot of people don’t realize, but the ocean is actually the world’s largest carbon sink. And when we put CO2 into the air, when we admit it because of fossil fuels, we also create acid acidification in the ocean. We’re taking CO2. We’re putting into the air that CO2 is going to the water and making it into carbonic acid, making it into Coca-Cola. And so in order for us to reverse that, we also have to remove CO2 out of the ocean. Speaker 1 [00:25:14] Phil, someone’s got to pay for this at the end of the day. And maybe this is where research capitalist meets the venture capitalists. What’s the economic model that’s going to make this sustainable? Speaker 4 [00:25:24] It’s actually very simple. We remove carbon dioxide from the air, the ocean. We generate a carbon credit and then we sell the carbon credit to customers. Because in the short term, it’s the voluntary carbon market, meaning it’s large corporations who have set net zero by 2050 goals. And I’ve realized that it’s going to be very difficult for them to meet them or they have scope three and diffuse emissions that they can’t address alone because they don’t have control over it. Or they’re visionaries like Microsoft who have said that they’re actually going to become a net negative and remove every historical ton of emission that they have emitted as a company since they were founded. Speaker 1 [00:26:06] One of the concerns that we’re talking about on this episode with respect to carbon markets is how can people be sure of what’s happening? How can we verify that a company or an operator or an innovator is putting carbon back into the earth and that it’s staying there? As a scientist, how are you thinking about that dilemma and what kind of error rate, if I can put it that way, should we be comfortable with? Because if we wait for perfection, we may run out of time. Speaker 4 [00:26:33] Exactly. No, that’s exactly right. And actually, that’s one of the theses of Deep Sky. We are moving fast and we are purchasing pilots from companies that are barely a year old knowing full well that many of them are going to fail. But that’s okay because we’re going to learn. To us, that’s the cost of discovery. So your question about monitoring comes down to this term monitoring reporting and verification, MRV. And there are different pieces of this, right? We know how to monitor gases and look at fluid flow. Reporting and verification is a little bit more difficult. How do you ensure that the reporting that you do is transparent? How do you track a molecule from start to finish? How do you ensure that you’re audited in a way that is fair, third party and reliable. At the end of the day, in order for this entire industry to succeed, we need carbon removal credits to be extremely liquid. We need them to be tradable. We need them to be transparent and trusted. So from a scientific perspective, it’s actually quite easy to measure this stuff. It’s all of the business and economics and regulatory infrastructure that needs to fall into place. Speaker 1 [00:27:38] Phil, before I let you go. I want to come back to that word discovery. It’s a very powerful and beautiful word. What do you hope to discover in the next few years in this space? Speaker 4 [00:27:47] Frankly, I hope to discover all of the failures along the way, because hitting those failures quickly is actually much better than half measures and cautioned approaches, when we have this urgency of climate change, breathing down our back. So to me, a success is we get as many failures as quickly as possible, and maybe we’re going to burn a lot of investment doing that. But when we hit that success, it’s going to make up for everything. Speaker 1 [00:28:16] What a great message, Phil. Makes me think that disruptors discover. And that’s a good call to action for everyone. Thanks for your discoveries and thank you for being on Disruptors. Speaker 4 [00:28:25] Thank you. Speaker 1 [00:28:27] That was Phil DeLuna, chief carbon scientist and head of engineering at Deep Sky. Today we heard from three very different people about the realities and ambitions of carbon markets and how important they are as a tool to fight climate change. Phil told us about the need to accommodate technology risk. When we think about climate action, there’s a lot of technologies out there that are working and we need to finance them at a scale that they’ve never been applied at before. That’s a different kind of risk for many investors. And carbon markets are going to have to figure out how to price that. Michael told us about the need for regulatory certainty. That’s pretty important these days as governments think about what’s working and what’s not, when it comes to climate action. And Danni reminded us what this is really all about, which is people and planet. The work that she and the communities around the Great Bear Rainforest are doing has to be front of mind when we think about carbon pricing and carbon markets and what we need to do collectively over the remaining years of this decade to mobilize the capital. The people all over the country and around the world are waiting to put to work. Until next time. I’m John Stackhouse and this is Disruptors, an RBC podcast. Talk to you soon. Speaker 2 [00:29:54] Disruptors and RBC podcast is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. For more disruptors content, visit rbc.com/disruptors and leave us a five star rating if you like our show.

Speaker 1 [00:00:02] Hi, it’s John here. I’m in Vancouver, where over the years we’ve recorded some of our best episodes of Disruptors, looking at innovative technologies from quantum computing to artificial intelligence to hydrogen. Today, we’re going to explore the cutting edge of robotics and an exciting Canadian company called Sanctuary AI. Sanctuary was created in 2018 by Geordie Rose, Suzanne Gildert, Oliva Norton and Ajay Agrawal. They wanted to take on what’s perhaps the most complex tech challenge in front of humankind, which is how to build a human-like brain and system that’s capable of executing humanlike tasks in a safe way. Sanctuary is on a mission to create the world’s first humanlike intelligence in general purpose robots. Success to the team is when a person like you or me observes one of its Phoenix general purpose robots and is not able to tell whether a human pilot is directly operating the robot or whether it’s being controlled by an AI system. Sanctuary is backed by a range of companies and investors like Bell Canada and Magna, as well as Export Development Canada and Evok Innovations. It’s also at the forefront of a global race to apply artificial intelligence to robotics in a way that can make society better. This is Disruptors, an RBC podcast. I’m John Stackhouse. What you’re hearing in the background is the sound of engineers at sanctuary AI. They’re busy testing the Phoenix robot systems in one of their labs. Sanctuary AI is nestled in a quiet semi-industrial neighborhood of Vancouver. It’s kind of an unassuming office with lots of exciting things going on inside. I’m going to be talking with their co-founder and CTO, Suzanne Gildert. Speaker 2 [00:02:13] Hi. Speaker 1 [00:02:14] Suzanne. Great to see you. Speaker 2 [00:02:15] Great to see you. Speaker 1 [00:02:20] Great to have you on Disruptors. Speaker 2 [00:02:22] Hello, thanks. I’m glad to be here. Speaker 1 [00:02:24] So many questions to ask, but I want to start with a bit of your own story. And your accent is probably a giveaway, right? But tell us a bit about where you’re from and what brought you to Canada. Speaker 2 [00:02:34] Yeah, so I grew up in the U.K. in a kind of medium sized town called Bolton, which is in the north of England. I guess science and physics is my first love. And then I also do a lot of art and stuff on the side as well. So I’ve got a bit of a left brain right brain thing going on there. I studied physics and electronics at university, did a PhD in quantum physics, and then at that point I decided to move to Canada to join a company called D-Wave. So that’s kind of where my foray into industry started, I guess. Speaker 1 [00:03:06] We’ll get a bit into the D-Wave story. We had them on Disruptor a few years ago, but tell us about your initial interest in robotics. Speaker 2 [00:03:14] Mm hmm. Well, I did hobby electronics with my dad, so I like building circuits and things like that. But when I first got interested in robotics properly was when I read a book by Jeff Hawkins called On Intelligence, and it was talking all about how the brain worked. And a lot of AI at that point was all about signals coming in, you know, through your eyes, through your ears. But that book made me think about the signals going out as well to your muscles to move your body. So I started thinking about AI is moving bodies in the world, and that usually means robots, because the robots are kind of the equivalent of bodies for A.I. brains. Speaker 1 [00:03:52] When did you build your first robot? Speaker 2 [00:03:54] I think it would probably be around 2012 or 2013 was the first proper one. Speaker 1 [00:04:00] And since then it’s amazing that it’s been just a decade. But the transformation of robots is breathtaking. Speaker 2 [00:04:06] Yeah, we’ve gone from having like tiny 3D printed sort of hobby robots all the way to one of the world’s most complex, full sized humanoid robots. Speaker 1 [00:04:17] I’d say we all have visions of robots often given to us or imprinted on our brains by Hollywood. I’m going to age myself here by saying I grew up with a TV show called Lost in Space, where there was this classic robot character, which I still think of as my reference point in robots. Curious what in popular culture with robots inspired you? Speaker 2 [00:04:38] I think the movie that inspired me the most was Chappie, which was kind of interesting, sort of like a gangster movie involving robots. But the thing I liked about the storyline there was that the way the AI system was developed to control the robot and the business and the industry and how that robot went out there into the world I thought was quite realistic, even though the movie itself was a bit crazy. Speaker 1 [00:05:05] As you said, you came to Vancouver, you came to Canada for D-Wave, really interesting company in the quantum space. How do you go from quantum to robots? Speaker 2 [00:05:15] So when I joined D-Wave, I was originally doing kind of physics experiments, but I found that I had a flair for actually programing the quantum computers and applying those quantum processes to problems. So, I got pretty good at quantum programing specifically for solving AI problems and then got really interested in AI. And it was around that same time that I read this on intelligence book, and that made me think about AI in terms of robots. So it was a bit of a weird pivot from quantum through AI to robots. And actually, now I’m getting back again interested in the quantum computing stuff because I think there are some ways we can apply quantum computing to robot and AI minds. So, it’s kind of coming full circle. Speaker 1 [00:06:01] So before we get to Quantum meets A.I., these robots, tell us about Kindred, because that was a company you co-founded with Geordie Rose. Yeah, great entrepreneur and innovator who you’ve started sanctuary with. What was the vision for Kindred? Speaker 2 [00:06:15] Hmm. Yeah. So the vision for Kindred was like, very similar to vision I’ve had all along for all these projects, which was we wanted to create a machine with humanlike intelligence. And we started by building these small humanoid robots. They looked kind of like Johnny five from Short Circuit. But the problem was because they were so small, they couldn’t really do anything. So what happened at Kindred was we took the control systems in the AI we’d been developing and we built a product robot that was very different from that. It was an e-commerce warehouse application. Where items came down a chute and then the robot had to sort the items into different bins. So we built a fleet of those and it was a very successful product, but we kind of lost a little bit of the original spirit of the mission of this sort of more humanlike A.I. So, although Kindred was very successful, we decided to spin out Sanctuary from that in 2018 to kind of go back to that early humanoid kind of vision. Speaker 1 [00:07:21] Why do you want robots to be more human? Speaker 2 [00:07:24] When I started doing this, this was a completely crazy idea. But if you look narrow, there’s actually a lot of humanoid prototypes being developed, and I think everyone’s now starting to come around to the same idea that if you want something that can do a lot of different general tasks in the world of work, a human like form factor is very useful because the world is designed for people. So what you find is if you build a humanlike robot, it just naturally fits into all of these environments that we already have that have been designed around us. And so I think the most general type of robot you could build is humanlike in form and function. Speaker 1 [00:08:02] And do you envision robots also being human, like inside in terms of how they think and feel, not just how they walk and turn door handles? Speaker 2 [00:08:12] Yes. Yes. That’s the goal of Sanctuary. It’s to build something that works very similar to how the human brain works and have that A.I. system controlling a robot that’s also very human like. And again, you might ask why? Like why not just create something that you can program and it does things like repetitive tasks. And the answer is, if you want this thing to be able to do lots of different kind of work and deal with all the different edge cases and strange things that can happen, you need something that’s very humanlike in its cognition. It has to be able to think like us reason about things. If something goes wrong, rethink, replan, deal with all the social beings that we interact with. So again, having something that had a human like mind is very useful for dealing with all these different situations. Speaker 1 [00:09:00] How far are we from not only having robots like that, but interacting on a day-to-day basis with robots like that? Speaker 2 [00:09:07] Yeah, it’s it’s a difficult question to answer because there’s a few key technology breakthroughs that I think have to happen before this will fully flourish. I mean, I personally believe by 2030 we’re going to definitely have these things walking around interacting with us on a day to day basis. Now, it could be sooner than that, but we can see a trajectory now for the breakthroughs that are happening to make this happen. And one of them is if you just look at the ecosystem, there is a lot more humanoids walking robots being developed. We’re seeing advancements in all these different areas of technology, from motors to simulation to computer graphics to A.I. algorithms. All these things are kind of a rising tide. So I think within a few years we’ll start to see the sparks of these things out there doing some work tasks. And then I think by the end of the decade we’ll start to see them being pretty general and behaving like us. Speaker 1 [00:10:03] So hearing that this is possible by the end of this decade, I’m both excited and terrified. Which should I be? Speaker 2 [00:10:10] We have the choice to steer where we want this to go. So one of the things I feel very strongly about is I want to build robots systems that do good in the world and get on well with people, interact well with those. They’re not in conflict with us. And in fact, one of the reasons that I want to make them like people is so that they understand us better and they’re able to communicate, live alongside us better rather than them just being some kind of alien machine. So a lot of people are scared of robots, but I think if they are behaving just like people are, then we will sort of get used to them very quickly. And I think they’ll become less and less scary the more people see of them. Speaker 1 [00:10:59] Tell us what your robots can do today. Speaker 2 [00:11:01] Right. So the systems we have today, we mostly operate them in what we call this teleoperation mode, which means as a person in control of the robot behind the scenes. So, a person wears some VR gear and they have a kind of an exo exosuit type rig that they sit in and they’re able to see what it sees through its camera. And so a lot of the tasks that we test, we put through this mode first because we want to make sure the robot can physically do the task. And then once we know it’s physically capable, look, we then move to trying to automate the task of trying to get the AI to then learn from that person to do the task. So we’re focused on fairly simple tasks, I’d say at the moment, like picking different objects from containers, placing them in other containers are on shelves or on fixtures. But if you look at most of what our brain is evolved to do is actually things like this majority of our brain is just all about understanding what objects are, how to use our hands to actually interact with the world and dexterously manipulate things and coordinate our entire body. We just take it for granted, but it’s actually quite difficult to get robots to do that. Speaker 1 [00:12:13] So give us a sense of why that is so difficult, because robotic engineers have been at this for probably close to a century now, trying to master or develop a mastery of those basic mechanical skills, picking something up, moving it across the table, things we learn to do when we’re two years old and now we don’t even think about it. I’m picking up a glass of water here. I don’t even need to look at the glass to do that. And yet for a robot, that’s actually a complex challenge. [00:12:43] Yeah, it’s very, very challenging. And it’s is kind of funny. You say like roboticists have been trying to do this for a century or something, but it actually took evolution a billion years to develop a brain that could do this. So I don’t think we’re doing too badly at the moment. But yeah, why is it hard? It’s hard because if you think about our sensors like our eyes and our ears, they’re kind of like cameras and microphones and there’s so much data coming into those sensors just, you know, megabits per second coming in. Our brain has to somehow turn that crazy stream of data into kind of a model of the world. And so that is just a really hard problem in itself. And then it has to do the opposite as well. It’s like has to turn a small piece of information into a stream of data that can control all the different motor signals. There’s just so many of them. So that’s why the problem is hard. It’s not impossible, but yeah, it just takes a long time. Speaker 1 [00:13:42] I won’t take it for granted the next time I go for a glass of water. Speaker 1 [00:14:00] This is fascinating. There must be many other companies also trying to do the same thing, solve the same problems. What do you believe is sanctuaries advantage in this so-called space race for robotics? Speaker 2 [00:14:14] I think we’re kind of a systems integrator, so we take a lot of pieces of different technologies and we put them together in a whole system. So we don’t just build robots, but we build all these different modules in the brain that controls the robot. And we don’t want to reinvent the wheel. We don’t want to build a module if we can get something off the shelf that works. Large language models are a great example. So when large language models came along, we realized we can actually integrate that into the brains of our robot. So we kind of got a nice, prepackaged piece of technology that could enhance it already. So I think our advantage is we’re very flexible. Whenever something new comes out, we’re quickly able to integrate it into our full system. Speaker 1 [00:14:59] So you’re essentially putting ChatGPT inside the robot’s brain. Speaker 2 [00:15:03] Yeah, that’s one of the things we put in there. Speaker 1 [00:15:05] What does that do to the robot? Speaker 2 [00:15:08] Right, well, it allows it to, I don’t want to say understand language, but it gives it a mechanism for translating language into kind of actions are the things that our brain understands. So the programing language that our brain uses is not anything like natural language, or English or anything is quite mathematical. So what things like ChatGPT or large language models enable you to do is kind of translate between what we mean when we say things and how that mathematical brain understands things. Speaker 1 [00:15:40] Eventually, from the way you describe it, is hard to imagine there being a difference between robots and humans. But is that going to be the case? Speaker 2 [00:15:49] I mean, I think they’ll still always be differences. Early on in Sanctuary made some robots that actually looked much more like people, but now we’ve made them look a bit more like industrial droids. Speaker 1 [00:15:59] Is that just to keep all of us from freaking out when one sees something that looks like us and acts like us? [00:16:04] Yeah, there were a bunch of reasons. Mostly it was for functional purposes. Like it’s just easier to build something like that and kind of get it looking good. And but I mean, who knows, I think anything could happen in the future. I think we could have a mix of different types of robots. So there’ll be some that look very industrial. Maybe there’ll be some that end up looking more humanlike. Yeah, I can imagine a rich future of different robots. Speaker 1 [00:16:30] I’m having visions of Westworld. Speaker 2 [00:16:32] Right, right, right. I mean, the whole Westworld problem is, is when you have these sort of sci fi stories, they’re always very dystopian. People who write sci fi stories want to introduce a lot of conflict and drama into the storylines. But I caution everyone to think that they’re doing that for a reason to make a good story. It’s not reality. Speaker 1 [00:16:53] Most of us just want a device that will take the garbage out or mow the lawn or shovel the driveway. Yeah. Well, let’s get into some of the applications. Where do you see the next generation of robots being actively used out in the economy or in society? Speaker 2 [00:17:06] So I think what we’re targeting is places where there are a problems with labor shortages in areas where there just aren’t enough people to hire to actually do tasks. And then secondly, those tasks themselves are very repetitive, very dull. They can often be dangerous. So I think looking at these kind of tasks first is nice because you’re taking people out of harm’s way and then in many cases there are no people to do those jobs anyway. So the reason they haven’t been automated yet is that there are often edge cases where things can happen that a regular robot wouldn’t be able to deal with. So imagine someone has to pick a part out of a bin and then place it in a certain direction on another thing. Well, what happens if that part falls on the floor? A normal robot wouldn’t know what to do. But if you had a general purpose robot, it now would be able to deal with that edge case, like bend down and pick up the piece, put it back in the bin or whatever. So we’re looking at those kind of tasks first. But then eventually, I’d love to see these robots actually opening up entirely new job areas that we haven’t even seen before. So, initially we’d be looking at labour shortages in places where there aren’t enough people to do work. But then eventually I would like these systems to do jobs that don’t actually even exist yet. Speaker 1 [00:18:25] A lot of the shortages that we all hear about are in areas that can be both repetitive but also have their own kinds of complexities. I was out with developers here in Vancouver listening to their challenges with getting construction workers and to know how many homes we need to build in this country over the coming decades. And yet, construction work is is very complex. It’s hard to move, move around to use the tools. Yeah. How far are we from having construction sites run by robots? And I can say the same about nursing wards and firefighting stations and the like. Speaker 2 [00:19:02] It’s difficult to put exact dates on these things because there are some unsolved scientific problems here. But I’d say within a decade, I think we’ll definitely see those kind of more complex roles starting to be tackled by robots. There’s so much more productivity we could be kind of squeezing out of the economy if we had these labor units able to be put in places where there are gaps or shortages or even peak demand problems. So, I think it will be a much more flexible economy with a hybrid labor model where there’s like people working and then there’s robots working to fill in where all those gaps are. Speaker 1 [00:19:48] How are we as a species going to need to adjust to work side by side with robots, maybe work for robots? I don’t know how it will evolve, but how do we need to change? Speaker 2 [00:19:58] One of the reasons I want to make robots that are very human like people so we don’t have to change very much. I want them to be very familiar to us already. So I want to build systems where when you talk to a robot, it’s just like talking to a person, you don’t really need to modify your behaviour. Might be a little weird at first, but, you know, within a few days of working with that robot, you’re considering it like to be your buddy or a great coworker. If you think about when cell phones first came out, remember people thought they were awful and now everyone can’t live without their cell phone. Being right next to them is almost like a little pet or something, right? If it’s not there, you feel so distressed. So I think these robots will be like that. And it seems weird now from our vantage point, but I think we’ll get so used to working with them that will actually start to maybe even rely on them a bit or trust them. Speaker 1 [00:20:49] Lots of companies come to you looking to develop use cases. Which sectors do you think are going to be most active in adopting robotics in the coming few years? Speaker 2 [00:20:59] I think the biggest one, probably be manufacturing. There’s a few reasons for that. It’s at this sweet spot of these tasks that are very dull. People don’t like doing them, they can’t fill the roles and these tasks can often be quite dangerous as well. And the other cool thing about manufacturing is you can onshore because the cost will be lower. So we can essentially bring back a lot of manufacturing or start spinning up our own manufacturing here in Canada. We could become a leader in manufacturing, right. It’s sort of difficult to think about today because we think about certain countries as being where you get everything manufactured. But maybe with these new kind of robots, that doesn’t have to be the case. Maybe the game is going to change. Speaker 1 [00:21:42] Absolutely, we trade with those countries often because of cheap labour. That’s our comparative advantage. And this is creating the ultimate in cheap labor. Although robots are made for free. How costly is it to produce a robot today? Speaker 2 [00:21:57] It’s really a function of the volume of units you’re producing. So it’s kind of like cars. It can cost millions of dollars to create a new kind of like concept car. But once you’ve created it and it goes to mass manufacturing, you can produce something like, you know, 10 to 20,000 dollars or something. So the same is true of robots. They’re expensive right now. But I can see the cost of them coming down to similar to how cars, cost of cars scale over time. It’s really just a function of how many of them you’re building. Speaker 1 [00:22:27] I don’t think many Canadians appreciate how advanced other countries are in robotics, particularly in in Asia. China has something like ten times the number of robots as the U.S. has and 100 times Canada’s rate. Where in the world excites you most in robotics right now? Speaker 2 [00:22:45] So although lots of countries and now are able to create these robots, the real value is going to be in the companies that are developing the software. So I think here Canada has a huge advantage because we have a storied history in AI development, like the people who are known as the godfathers of AI did all that research here in Canada. So I think, you know, because we’re not classically known for manufacturing and hardware, I don’t think that’s really a problem because we can become a leader in the software and the control systems, which is where most of the value is. Speaker 1 [00:23:18] So the hardware can come from somewhere else and they develop essentially the brains of the robot. We also have a tremendous advantage in our universities. Well, that’s why we have those godfathers. I think it’s six of the top 100 robotics schools in the world are in Canada, three of the top 50. That’s really impressive. How should companies or public sector organizations, for that matter, be thinking about robotics? Speaker 2 [00:23:43] So I would have said a few years ago it was it was pretty niche and new. And the people that were interested back then were very early adopters. But what’s happened in the last few years is the category is actually now starting to emerge as a thing. So I’d say anyone who’s in business, especially when manufacturing or industrial type businesses to start having a look at this category because it’s now definitely on the horizon, it’s becoming a big thing. And I think the competitors will probably be looking at it as well. Speaker 1 [00:24:20] The most successful companies that you get to work with on robotics, what do they do that differentiates them? Speaker 2 [00:24:26] It’s a little early to know the answer to that question yet, because I still feel that the category is emerging. But I think what’s going to happen is the really innovative companies are going to be the ones that see the furthest out and don’t kind of get trapped in just, well, let’s build a special purpose robot for one task first and then we’ll expand from there. I think it’s going to be companies that are really looking at solving the fully general problem of how could you create a robot that could go around and do anything. So one thing that’s both very scientifically interesting, but also very easy to explain to someone is this idea of a domestic helper robot that can do all your chores for you. And it sounds kind of boring and mundane, but really trying to think about how to solve this problem. I think that’s where the companies of the future are going to get ahead, like taking a stab at those really hard problems that seem out of reach right now. Because in five years time when those companies are maturing, that won’t be out of reach anymore. Speaker 1 [00:25:30] You’re very hopeful about robotics. I can feel it and hear it in your voice. What’s your greatest hope in the next decade? And equally, what’s your greatest fear? Speaker 2 [00:25:40] My greatest hope for robotics is that we really do figure out and learn and grow these things, such as they get along with us and we’re able to work alongside them and not have that kind of conflict that you see in the sci fi movies. I think we need to have a mindset shift moving away from this thing that we fear to something that’s there to help us and really sort of like lift us to the next level as a civilization. My biggest fear is that we’re not able to be mature enough about this kind of technology and we overregulate, we start banning things and things suffer as a result. So I really do think with some scientific and AI advancements, we can address some of the problems that we’re having in the world, like supply chain issues, climate change, disease prevention and things like that. I think AI and robotics could really, really help with these areas where there are huge, open, unsolved scientific and geopolitical problems. And so my biggest fear is that we don’t embrace that and we kind of get stuck in a stalemate of everything being regulated and stopped. Speaker 1 [00:26:52] As you’re building sanctuary. And by the way, I’d love to know why you call it Sanctuary. Are you needing to bring in different skill sets and ways of thinking to help you think through these fascinating but fairly deep challenges? Speaker 2 [00:27:07] Yeah, absolutely. So on your first question, why do we call it Sanctuary? Well, it was designed to be a place where we could create this little bubble of unreality. So when we started Sanctuary, people didn’t believe these humanoid robots with humanlike minds could exist. So we wanted to create a place that was a sanctuary for people that actually believed in that and believed that these kind of systems can be built and used for good. So I think it’s great to have like a lot of scientists and engineers. But as we grow, it’s really important to understand how these systems will go out there in the world and integrate into business and industry and life in general. So, we need a lot of different people who have a lot of different expertise, you know, everything from hard core engineering to understanding creativity and design. And then people who really deeply understand customer needs and how these systems might be integrated. So yeah, lots of different skill sets I think are needed to really make it happen and bring it into the world. Speaker 1 [00:28:08] We’ve talked a lot about robotics and it’s incredibly interesting, but I’d love to know a bit more your thoughts on humanity and how you hope these advancements in robotics can change and improve humans. Speaker 2 [00:28:24] So the obvious answer is they can come into our everyday lives and really help. But I think the more kind of thought provoking answer to this question is we’re trying to build minds and brains that control robots. So in doing so, I like to think we’re actually understanding more about how our own minds work. And I think understanding ourselves and how we behave and act and how we process the world and process emotions and everything as people, I think we need more of that. I think we need more introspection. So ironically, by building A.I. minds, I think we’re actually going to understand ourselves better. Speaker 1 [00:29:02] That’s a great message of hope to leave our listeners with, Suzanne. Thank you so much for being on Disruptors. Speaker 2 [00:29:07] Well, thanks for having me. It was really fun. Speaker 1 [00:29:13] Leaving the sanctuary labs, I’m back on the streets of Vancouver and it all feels very human again and yet very different. There’s people I think there are people driving cars and walking their dogs and going home from work and doing what humans do. That won’t change. But as we all know, technology is profoundly changing almost every aspect of our lives. We just need to look at the phones in our hands to realize that. And the power of robotics, especially when AI is applied, is almost beyond human comprehension. And that’s the exciting part when we apply our imagination to the power of technology, we’ll be able to tackle what today seem like insurmountable challenges. At least that’s always been the hope and promise of technology, and it’s really up to humans to take advantage of that. This is Disruptors. An RBC podcast. I’m John Stackhouse. Talk to you soon. Speaker 3 [00:30:19] Disruptors, an RBC Podcast is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. For more Disruptors content, visit our RBC.com/disruptors and leave us a five star rating. If you like our show.

Speaker 1 [00:00:01] Hi, it’s John here. It’s Autumn, so you may be listening to this inside. And if you are, I wonder if you can pause and look around you to the walls, the floors, the ceilings, the windows. They make up the built environment that not only shields us from the elements, they help define us and shape our lives. They also need to change because the very elements and processes that go into making these structures are also a challenge to the climate. I got to thinking about this recently in Vancouver, which is one of my favorite cities anywhere, and not just for the mountains, which form one of the world’s most stunning urban backdrops. The city’s architecture is a design signature. It’s the work of visionaries like Arthur Erickson and Peter Busby and Eva Matsuzaki. It’s also changing. Vancouver is setting the pace for Canada in sustainability. It pioneered green rooftops and district energy systems and is now carving the way for new building materials from mass timber to cured concrete. It’s a buildings revolution that’s not just limited to Vancouver. The way we build our homes and offices and warehouses is changing right across the country. The big question is can we do this when housing affordability and the cost of buildings in pretty much every part of the country has become a national crisis, how can we make sustainable buildings the new norm and do it in a cost-effective way? And how do we do this fast enough when we’re already well into a building boom that will shape the way we live and look for the rest of the century? This is Disruptors. An RBC podcast. I’m John Stackhouse. In the decades following World War II are often described as the golden age of architecture. But if we build new homes using traditional approaches of even the past few decades, we risk adding 20% more emissions to a footprint that’s already the third largest in Canada. Buildings account for 13% of our carbon footprint, and by 2030, that could certainly grow if we add the millions of new homes needed to accommodate a growing population and make housing more affordable. We need a new plan that changes how we design, construct and renovate to ensure buildings and communities are fit for the future. Today, we’re discussing Canada’s new green print and the next generation of building materials. And to help map it out. We’re joined by two leaders in sustainable building development. Our first guest is Chris Stern, the CEO and co-founder of Carbicrete. It’s a Montreal based tech company that’s focused on carbon removal and is developing innovative, low cost building solutions that contribute to the reduction of greenhouse gas emissions and enable the production of cement free carbon negative concrete. Chris, welcome to Disruptors. Speaker 2 [00:02:58] Yeah, it’s great to be here, John. Speaker 1 [00:02:59] Chris, I want to take you back to the foundations, if you will, of Carbicrete. Can you share a bit of the origin story with us? Speaker 2 [00:03:06] Yeah, So actually it’s my second startup. My first startup was in solar power. We had a company called Pure Energies, which we started in Toronto, expanding into the States, grew to 200 people, and sold it to NRG in 2014. I was looking for something else to do afterwards and I was introduced to the folks at McGill in 2015 and I knew nothing about cement and concrete and learned very quickly that you could make concrete without cement, which is the foundation of the Carbicrete principle. Speaker 1 [00:03:34] And what was the problem that the researchers at McGill were trying to solve? Speaker 2 [00:03:37] They’re trying to find some alternatives to cement because cement is responsible for 80% of greenhouse gas emissions. It would be the third largest country after China and the United States if it were a country. So, not only did we find a replacement, which is steel slag, but we also use carbon dioxide to cure it. So we permanently remove CO2 from the atmosphere when curing the product. Speaker 1 [00:03:59] And for all us non-scientists. Explain to us a bit how that works going from slag to something that can hold up our roofs. Speaker 2 [00:04:07] Basically for cement based concrete. You know, you make a product like a concrete block and you add water to it and then it cures over 28 days to get full strength. With our products, we take something called steel slag, which is an industrial waste byproduct of a steel making application. We grind it to the same consistency of cement, mix it with sand and aggregate water, make a product like a concrete block, and then instead of waiting to cure over 28 days, we inject carbon dioxide into the curing system. The CO2 reacts with the calcium oxide and creates calcium carbonate, which we all know as limestone, effectively concrete. Speaker 1 [00:04:49] How is this going to change the nature of buildings? Speaker 2 [00:04:52] Well, they’re going to be carbon negative. At least, the concrete part will be carbon negative, which is very important because almost 30% of the current emissions are from the built environment. So we have to attack it from many different angles, including the concrete. Speaker 1 [00:05:04] And I imagine that’s not an easy challenge. What are some of the obstacles that you’ve been coming up against? Speaker 2 [00:05:10] I mean, some of the obstacles. I mean, we’re changing something that’s been the same process that’s been used for thousands of years, invented by the Romans. And of course, the industry is extremely staid and they’re not really open to change. There hasn’t been a lot of innovation. So, you know, everybody’s interested in the product. And now is the time for scaling up. Speaker 1 [00:05:27] Then scaling up in every sector is challenging. How is that a special challenge in the construction industry? Speaker 2 [00:05:34] Well, everybody wants to make the change. You know, initially. Then they say, well, can we try one or two different systems instead of changing over our whole plan? So one of the challenges is to convince people to change their whole plant, to work within a strategy to to basically acquire existing plants and convert them. Speaker 1 [00:05:52] One of the obstacles I keep hearing about across the sector is building standards and codes, which are slow to change. Maybe for good reason. We don’t want to be radical with the way we put up buildings. How are you grappling with trying to transform the way we approach concrete? Speaker 2 [00:06:07] So, our target market is masonry. So what is masonry? Masonry, dry casts, and that includes concrete blocks, paving stones and retaining walls. Paving stones and retaining walls, you don’t need to meet special codes. You just have to make sure that it meets the specification with load bearing walls, yes, we do have to follow a certain guideline in Canada, but for non low bearing walls, you know, it just needs to be within spec. We are going with the low bearing walls, but we’re also opening it up and attacking other other markets. Speaker 1 [00:06:37] And does this lead to a business model change for people through the supply chain, or is it simply taking out one element and putting in another? Speaker 2 [00:06:46] Well, it’s a bit of a change. I mean, steel slag looks like cement its ground. So from that perspective, it would just go into a silo at a concrete plant. So it’s a different supply chain, but it looks similar. And then the other thing is that carbon dioxide is not typically used in a concrete manufacturing plant. So the CO2 is actually an addition as well. Speaker 1 [00:07:07] I’m guessing this sort of transformation is underway in a number of countries, and probably lots of scientists and techies are racing to get to the best mousetrap. What sort of advantages does Carbicrete feel it has over what’s going on in other markets? Speaker 2 [00:07:19] Look, the market is 30 gigatons of concrete per year. There’s four tonnes per person being manufactured, so it’s wide open as you can imagine. And so we’re welcoming as many people that we can to the fight against carbon emissions, and that includes other technologies. But if you’re within 150 kilometers of a steel plant and you have a masonry plant, there’s no reason why you wouldn’t use the Carbicrete technology. Speaker 1 [00:07:43] And you have to be near the steel plant for that slag or are there other inputs that you can turn to? Speaker 2 [00:07:48] You should be relatively close to the slag input. You could also boat it over and put it into barges. But typically what we’re looking at is, you know, a centre of operation that’s close to a steel plant. Speaker 1 [00:08:03] How fast do you see this transforming the industry? Speaker 2 [00:08:06] Look, there’s enough steel slag in the world to make about two gigatons of carbon negative concrete. So, you know, we’ve got our internal goal of 2030 to get through a gigaton. But that’s, you know, obviously, it’s going to take a lot of nose to the grindstone, as they say, but it’s a goal and we’re fighting towards it. Speaker 1 [00:08:24] Where do you see the company being 3 to 5 years from now. Speaker 2 [00:08:27] Throughout North America in many different markets. So we’re looking at Texas, the Great Lakes, the Northeast, like New York, as well as the Southeast, and then through Quebec and Ontario, in the continental Europe as well as in the UK. So that’s where we see ourselves in the next 3 to 5 years. Speaker 1 [00:08:44] Great markets. Sounds like a great product. What do you think will be the key variables in your drive to get there? Speaker 2 [00:08:49] The key variables are capital inputs and getting people to convert either during that by retrofitting the brownfields that exist, building new green fields or less to the tech to the larger players. Speaker 1 [00:09:02] Chris, this is a great story. Thanks so much for being on Disruptors. Speaker 2 [00:09:05] Appreciate, John, Great to speak with you today and have a wonderful day. Speaker 1 [00:09:11] That was Chris Stern, CEO of Carbicrete. Stay with us. In a moment, we’ll meet another innovator in building materials who’s focusing on mass timber. Speaker 1 [00:09:29] Welcome back. Today, we’re talking about building materials and how sustainable solutions are impacting the cities and communities all around us. Our next guest is Patrick Chouinard, the founder of Element5. It’s a Toronto based mass timber manufacturer specializing in the design, fabrication and assembly of contemporary timber structures. Element5 strives to make a positive contribution to communities, the environment and future generations, with a view that timber is the essential building material of the 21st century. Patrick, welcome to Disruptors. Speaker 3 [00:10:02] Thank you for inviting me. Speaker 1 [00:10:04] It’s great to have you on the podcast. I wonder if I can take you back to the start of Element5 and get a sense of what the vision was for the company. Speaker 3 [00:10:12] Well, the company started in 2015. Prior to that, I had been working in the log home industry and saw that they had a really interesting business model where they created weather tight shell packages for single family log homes. And then I realized that instead of using logs by using mass timber and CLT in particular, instead of just being able to sell single family homes and rural environments, I would be able to sell prefabricated commercial buildings in urban centers. And so that was a journey that began about 12 years ago. And everything we are today is a realization of that early vision. Speaker 1 [00:10:55] I remember as a kid seeing those prefab log homes on the roadside and kind of always wanted what they looked really cool. Is that essentially what you’re doing for the high rise market? Speaker 3 [00:11:06] Essentialy, yeah. These are buildings that are being prefabricated in a high tech facility and being shipped to site where they are assembled rather than constructed in the traditional sense, much like the same business model for log homes. This is just a much larger business opportunity for larger market and larger buildings for sure. Speaker 1 [00:11:26] Tell us about the climate benefit of this, as well as the economic opportunity. Speaker 3 [00:11:30] Well, the concrete and steel industries are responsible for approximately 12 to 14% of the carbon dioxide from the atmosphere. But when we’re building with wood, what we’re doing is we’re leveraging our forests’ natural ability to absorb and to store carbon in the form of these beautiful buildings. So unlike the concrete and steel industries that are spewing carbon dioxide into the atmosphere, we found a systematic way of not only removing it from the atmosphere but storing it and building form. Speaker 1 [00:12:01] What are some of the challenges in scaling this up? Speaker 3 [00:12:04] Oh, there are many. I think generally the construction industry is used to doing things in a certain way, so there’s a huge amount of inertia in the industry because of what we’re doing. Being innovative, there are few architects and engineers who know how to design and engineer buildings in this way. There’s there’s a few general contractors that know how to assemble buildings this way. There isn’t a lot of education happening at the university and college level about mass timber. There’s building code challenges. It goes on and on. However, we’ve made some significant progress in the mass timber space and now the industry is just really well poised to take off. Speaker 1 [00:12:52] One of your challenges, of course, is building codes and the resistance, especially among municipalities, to allow too many of these structures to go up either too quickly or too high. How quickly do you see that changing? Speaker 3 [00:13:04] Well, it’s come a long way in the last seven or eight years. When I started, we were only able to build to four stories. Then about five years ago, we were able to go to six stories. Recent code change in Ontario allows us to go to 12 stories. So the Ontario government has actually been very supportive of what we’re doing and code has changed quite rapidly. Speaker 1 [00:13:29] And how does the supply chain have to change? Because these building blocks, if you pardon the expression, need to come from centres that can be pretty far away. Speaker 3 [00:13:38] Yeah, a very good point. When the mass timber industry started, materials were being shipped long distances from Europe, for example, or from British Columbia. So it used to be that because we were bringing materials in from long distances, that mass timber was generally thought of as being more expensive than traditional construction materials locally. But now that we source all of our materials from Ontario, we manufacture in a high tech, fully automated manufacturing facility in Ontario. We ship most of our products locally. We’ve been able to drive down the cost of mass timber so that it is competitive and in fact, if properly designed, a less expensive than traditional construction. So managing that whole supply chain is paramount. And as a manufacturer, we also control the supply chain right from floor through to the finished product, through some relationships that we have with sawmills in northern Ontario. Speaker 1 [00:14:39] My impression is that mass timber buildings are still seen as a niche product and largely done for aesthetic as well as climate reasons, as opposed to economic reasons. Is that a fair impression? Speaker 3 [00:14:51] I would say that it’s still fairly niche. Right now it represents a fairly small percentage of the overall construction market. Ontario is incredibly well poised now to take a leadership role in this industry. There are 20 or 25 large mass timber projects currently in design, development or construction in the Ontario marketplace. Pretty much every major university or college in Ontario is now building a mass timber project. So Ontario has vast resources of forestry materials to be able to supply to the mass timber industry. Because of where we’re located geographically, we have ready access into the central part of the United States in the whole Eastern seaboard. Americans can still buy product from Ontario at a discount because of the exchange differences. So, despite the challenges, Ontario is in this incredible position to be able to take a leadership role in mass on a global scale. Speaker 1 [00:15:50] How significant a part of the cityscape is mass timber going to be if you can look out 25-30 years? Speaker 3 [00:15:57] Well, it’s been slow to take off, but we have recently been shortlisted among three other vendors for all affordable housing in the city of Toronto for the next three years, plus two year optional years beyond that. We’ve made some inroads into the affordable housing space, mass timber is being now used as a very practical solution for the affordable housing needs. And so particularly in that area, we see a lot of growth in the use of mass timber for affordable housing. Speaker 1 [00:16:31] I’m glad you mentioned affordable housing because we entered this conversation from a climate perspective, but it’s critical to all all sorts of social equity as well as economic growth issues. How does mass timber benefit affordable housing? Speaker 3 [00:16:46] I think the first challenge in affordable housing is lowering overall cost. One of the reasons we took on affordable housing was to dispel the belief that mass timber is more expensive than other forms of construction. And we’ve been able to demonstrate that over the last two years we have delivered four affordable housing projects. We’re contracted for about another eight or nine affordable housing projects. We have won every one of those projects against all the usual contenders; stick frame construction, precast concrete companies that are building boxes and stacking boxes on site. And we we’ve won every one of those based on price. So we know that mass timber is an affordable solution. Second of all, it’s much faster to construct a mass timber building than it is traditional construction materials. There’s about a 20 to 25% savings. And the other real advantage is we know that building with mass timber is much more environmentally friendly than concrete or steel alternatives, and because of the biophilic benefits of wood, we’re also creating healthier environments for people. So there there are many benefits in the affordable housing space for use of mass timber. Speaker 1 [00:18:10] Why are mass timber buildings faster to build? Speaker 3 [00:18:13] Because they’re all prefabricated in a high tech manufacturing facility, and there’s no cutting of the materials on site. The buildings essentially go together like IKEA furniture. And so that gives you much better cost control, much more schedule predictability. There’s fewer workers that are required on site. And so the buildings go up much faster than traditional construction. Speaker 1 [00:18:36] And for those living or working in such buildings, do they notice the difference? Speaker 3 [00:18:41] Absolutely. When you’re in a mass timber building, you have the elements that are exposed to some degree. The building has a different feel to it. You really have to be in it to appreciate it. I don’t know whether you’ve spent any time in some of the old brick and beam buildings in the city of Toronto. These are absolutely beautiful and there’s a real demand for those buildings. And I think it’s because of the exposure to the natural elements. I think as human beings, we just feel more comfortable in those kinds of environments. So there’s definitely a different feeling when you’re in those buildings. And because they’re made with heavy timber and solid materials, there’s also a sense of safety and security that you don’t get in, you know, an equivalent concrete or steel building. Speaker 1 [00:19:29] I love brick and beam, except in February. They tend not to be so comfortable in winter. But a final aspect of this that I want to ask you about is First Nations involvement, because this is very explicit in your corporate citizenship positioning. I wonder if you can explain how mass timber buildings benefit Indigenous communities. Speaker 3 [00:19:50] Many of the Indigenous communities are in remote locations and they don’t have a lot of access to trades. So the more work that can be done on a building in a factory environment, the less reliant you are in remote communities where you don’t have access to those trades. So that’s one of the things. There’s often short building cycles in these remote communities, so you need to be able to put up a building quickly. You need to be able to put it up, you know, economically as well. And because these buildings are out of wood and natural elements, there is that natural connection that they very much appreciate in these communities. Speaker 1 [00:20:30] What a great vision for not only how we build our cities, but how we connect with the natural environment and indeed with communities that also preserve and protect natural environments for us. Patrick, thank you for being on disruptors. Speaker 3 [00:20:45] You’re welcome. Thank you for having me. Speaker 1 [00:20:49] That was Patrick Chouinard, founder of Element5. And if you’re wondering why the company is called Element five, Patrick explained it quite succinctly. In the ancient world, there were five elements earth, water, fire and air, of course. And the fifth element was wood. Wood is also the subject of a new report from the RBC Climate Action Institute, which looks at how mass timber can be at the heart of decarbonizing Canada’s building sector. The principal author of the report is Myha Truong-Regan, the Head of climate research here at RBC. Myha is an economist and public policy analyst and also a former urban planner. Myha, welcome to Disruptors. Speaker 4 [00:21:28] Hi, John. Thanks for having me on. Speaker 1 [00:21:30] You’ve got a great new report out. I wonder if you can share some of the key findings with us. Speaker 4 [00:21:35] Oh, absolutely. So one of the challenges of the building sector is the intensive use of concrete and steel. And as the sector looks to decarbonize, what it’s looking to do is to look to the past in terms of what building materials have use in past and how can we apply modern science to bring some of those materials into the future. And one of the areas that the sector has looked at is wood, in particular mass timber. And what we’re seeing is an actually uptick in the use of mass timber within Canada. And this was essentially enabled by a series of national building code changes to allow buildings up to 12 stories that can be constructed with mass timber. Speaker 1 [00:22:13] I love that idea of looking to the past as we think about the future. What did we learn most? Myha From the past in the building sector that can be relevant to where we’re going? Speaker 4 [00:22:24] I think what we can learn from the past is that Canada is a nation of builders. We are a nation of innovators and we have the talent and the skill set to help decarbonize the sector. We often are so tech focused in terms of, well, there must be better technology out there and whatnot, but the rise of mass timber is really focused on knowledge and technology that has existed for the past 30 or so years. But we couldn’t find the right time for there to be an appetite for the use of mass timber until quite recently. So I think that’s what we’re learning. Speaker 1 [00:22:55] What surprised you most in your research? Speaker 4 [00:22:58] I was just shocked by the amount of concrete and steel that is used in the construction of high rise and rise buildings today, whether they be offices or condos or apartments. And I think part of that surprise comes from the fact that when you walk into these buildings, they’re covered up. So your sense of whether or not it’s been built with concrete and steel isn’t evident to you. But in the course of doing this research, coming up to the fact that 82% of all building materials consist of concrete and steel, which is extremely fascinating, and that mass timber only represents 1% of the mix. We have almost 700 buildings completed with mass timber. But I think within the space were demonstrating to the world and to Canadians, hey, Canada, we’ve got this. We are leaders. Let’s now try and tell the world how to build with mass timber. And I hope that this paper will inspire Canadians, whether they’re architects or builders or just a student of architecture, to perhaps think about a new way of building for a low carbon world. Speaker 1 [00:24:05] As you’ve laid out, there are the products and processes already in the market that can advance our decarbonization. What are the things we can do in the near-term to accelerate this transformation? Speaker 4 [00:24:18] I think one of the key opportunities is really around the insurance issue. If you take away the insurance cost of mass timber, buildings are achieving cost parity with those that are built with concrete and steel. But the key unlock that has to happen is to address this question around building construction and occupancy insurance. My research has found that the cost can be up to ten times a traditional steel and concrete building. But through some innovative thinking about risk and whatnot, those costs can come down and can achieve parity with insurance premiums that are the same, if not lower than those for concrete and steel buildings. Speaker 1 [00:24:57] Myha, As I said in the introduction, you’re head of climate research here at RBC. You also have a background in urban planning. I wonder as we move towards close, if you can give us your sense of why we don’t seem to take buildings seriously enough in terms of climate action for the country, when we look right across the economy and which sectors to focus on most? Speaker 4 [00:25:19] I think because we live in buildings and it’s not evident to us that it is actually a lever of change that we can pursue. Unlike, say, our cars, where, you know, it’s dynamic, you’re moving the car, you can figure out how much gas your burning but with a building, whether it’s your home or office, it seems rather static and seems rather permanent. And I think often that then perhaps gets equated into the fact that that’s not a lever of change that can be exercised in decarbonizing the built environment. Speaker 1 [00:25:48] That’s a great insight and we’re excited to see how your report helps to change people’s thinking about the opportunity with the built sector and Canada’s journey to net zero. Myha, thanks for being on Disruptors. Speaker 4 [00:25:58] Thank you, John. Speaker 1 [00:26:03] That was my Myha Truong-Regan, head of climate research in the RBC Climate Action Institute. We’ve just heard how profoundly important buildings are to the energy transition our homes, our offices, our shopping centers, our schools. They all have a role to play in our journey to net zero. And often, as we’ve seen through history, the way we build our communities can be transformed by catalytic events. One in Canada was the 2010 Winter Olympics in Vancouver, which allowed for a remarkable new generation of buildings. And the same sort of spirit will be on display next summer in Paris, where all new public buildings have been mandated to have at least 50% sustainable materials like the ones we heard about in this episode. There were a few key points that I take away from this conversation. One is the basic fact that buildings are critical to the climate transition. And secondly, the technologies that we need to transform buildings are already in the market. We heard about new approaches to concrete and timber, and there’s lots more going on with steel and glass and other materials. But it’s not just technology. There are decisions that we as a society need to come to grips with. And lastly, as we heard in all our conversations, Canada can be a world leader in this new buildings renaissance. We have the materials, whether it’s wood or steel and the skills from architects to engineers to construction workers. We’ve also got some of the industrialized world’s fastest growing cities, and that’s likely to continue as people come to Canada from around the world and our population grows. We’re going to need to think differently about how we build our neighborhoods, our communities, our cities and our countries. But as we’ve seen in Canada for generations, we’re a nation of builders, and we can now be a nation of sustainable builders. Until next time. I’m John Stackhouse and this is Disruptors, an RBC podcast. Talk to you soon. Speaker 4 [00:28:04] And Disruptors and RBC Podcast is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. For more Disruptors content, visit RBC dot com slash disruptors and leave us a five star rating, if you like our show.