Taking Action for Sustainability with Derek Lyons, Co-Founder, and CTO of Actual

(Intro Narrator at 00:00:03) Hello, my friends. Today, Joel is talking to Derek, co-founder and CTO of Actual, and they discuss how Actual helps large organizations meet their sustainability goals through an ESG platform, work they're doing to make the wool industry in New Zealand carbon neutral, and why environmental sustainability reporting doesn't mean much without a solid plan. All of this right here, right now on the Modern CTO Podcast.

(Derek at 00:00:33) Here we go.

(Joel Beasley at 00:00:34) This is the Modern CTO Podcast. Your background is crazy. DOD Fellow. You have all these amazing credentials. Who's advising you on getting involved with this stuff?

(Derek at 00:00:52) For the academic credentials?

(Joel Beasley at 00:00:54) Yeah.

(Derek at 00:00:55) Yeah. I just had a really great network of professors, mostly, who were just great mentors. And I think that's one of the advantages of a liberal arts college environment, which is what felt like the right fit for me. At that point in my life, I wanted something a little smaller, a little more like getting to be able to get to know professors more as people. And that worked out really well because, you know, when you do get to know the people that are advising you in that way, it really helps them help you because they know you really well also. So it's just a very good nurturing environment for figuring out what I wanted to do.

(Joel Beasley at 00:01:38) And then how did you get that DOD Fellow thing specifically? I'm curious because I'd love to be in the movies when they're behind the scenes and they're meeting with the board. I assume that's what a DOD Fellow is.

(Derek at 00:01:50) It's much less fancy than that. I think it's, well, it's a wonderful program. It's just a fellowship for STEM fields, basically. My co-founder, Karthik, actually, just by coincidence, was also had that same fellowship in his graduate program. So they just do very broad support of fundamental research. In my case, it was in the psychological sciences, looking at cognitive psychology and a little bit of AI. And it's similar to other programs like the National Science Foundation fellowships and things that just takes some of the practical headache off your shoulders in grad school, worrying about teaching stipends and things like that, and allows you to really focus. So I was very grateful for that as a support in graduate school.

(Joel Beasley at 00:02:36) Now, is that where you met your co-founder?

(Derek at 00:02:39) No. We met much later. I have two co-founders. One, Rajesh, who I met about, getting on for ten years ago now, which is kind of disorienting every time I say it. But I joined one of his previous startups, which was called Hyten. So I joined there as a software engineer, got to know him really well, and we really connected over kind of a shared affinity for creative technology. We're both really into games and just thinking about the edges of creative tech and ways of applying it in unexpected ways, which is actually a theme that comes through in Actual. And then through Rajesh, Rajesh also knew Karthik from about that same time because he was an investor in one of Karthik's previous companies. So Rajesh introduced Karthik and I, and then the three of us just started riffing and talking and brainstorming. And yeah, that's how we got started.

(Joel Beasley at 00:03:31) Nice. Nice. So did you say something about game programming? Were you doing video game programming?

(Derek at 00:03:36) A little bit. Yeah. Games have always been a huge interest of mine. I was from the Nintendo 8-bit era of the old Nintendo Entertainment System. So way back in the day, my first job was a paper route that I got expressly because I really wanted to save up dollars over many, many months of doing a paper route split with my best friend. Took a long time. Sometimes I go back when I think about it. I go back and do the math. It was like 5 cents per paper, split two ways with my best friend. It took a long time to get to that Nintendo Entertainment System. But yeah, that was just an immediate, incredible love of mine, just the creativity of it and the kind of wonder of all of the kinds of experiences that were possible. So that, I think, had a large amount to do with putting me on the path to really being interested in building things, like building experiences and systems, and eventually getting into engineering.

(Derek at 00:04:56) And then after grad school, I did work for, briefly, in iOS games, working for a really great startup here in the Bay Area called Motion Math. It was doing one of the first, I think, really creative uses of the iPad for educational games for kids, math games that were very creative and really leveraged what was new and interesting about that device in a way that, for the time, I mean, this was at the very start of the iPad era, was really kind of visionary, I think. So that was a lot of fun. Really neat job to cut my teeth in the industry.

(Joel Beasley at 00:05:06) Yeah. They've got some amazing, my wife homeschools our kids. We got a four-year-old and a three-year-old. My background, seventeen years as a software developer, not in any games or anything, mostly in enterprise business logic type stuff. And when I saw how advanced these technologies were for teaching these kids and how premium of an experience it was, it just made me really happy inside because my daughter is oddly in love with math and stuff.

(Derek at 00:05:28) Oh, that's awesome.

(Joel Beasley at 00:05:28) Yeah. My son, no. Not at all. My son wants to go outside and throw rocks, but which is fine. But she really, she wakes up on Saturday and will ask us, "Oh, can we do schoolwork?" And to her, that's taking the tablet and going through some exercises, and she progresses, and they gamify it and all this stuff. So I was like, man, that was not how school was when I was this kid.

(Derek at 00:06:01) Yeah. And it can be, I mean, it can be very adaptive to where the kid is at in terms of their understanding. The best systems do a really good job of that. So it's definitely an example of using that technology to do something really beneficial and constructive. The best educational games are really something special.

(Joel Beasley at 00:06:22) Yeah. It's definitely putting pressure on the school system and the concept of grades over years, where it's more like, it reminds me a lot of the software industry where it's just knowledge and ability to achieve. And that to me is beautiful because that means she can progress as fast as she wants to progress, and the software doesn't hold her back because of her age. It doesn't say we're not going to teach you this concept because you're this age. It just lets you go. These next generations, man, they're going to be super smart. We've got to watch out.

(Derek at 00:06:49) We're going to need to be. So yeah.

(Joel Beasley at 00:06:53) And so what are you doing now?

(Derek at 00:06:56) Well, for the last several years, I've been working with my co-founders Rajesh and Karthik on Actual. And something we're tremendously passionate about, really feel like we've arrived at an important time. When we decided we were going to do something together, the question was really, what's the most impactful thing we can do? Because Rajesh and I had worked in enterprise. Karthik had worked more in kind of consumer financial services. And those are all great, traditional software industries. Lots of interesting problems to solve there and businesses to build. But at this point, you know, having done that and feeling like we were really well grounded in the basics of building a successful business, we wanted to kind of push the envelope and say, "Okay, what's a real problem that exists outside of the confines of SaaS businesses that needs to be solved?" And the very obvious one for anybody thinking about this at this moment in history is sustainability, and how do we get ourselves out of this really deep hole that we've dug over the last decades.

(Derek at 00:08:03) So that's what Actual is, is our answer to that question of what can a software company do. And what we're building with it is an ESG transformation platform. And the goal is to really provide a toolkit that's going to help enterprises, governments, large organizations of all kinds, not just set goals for their environmental change or ESG strategy. Not that goals aren't important. I mean, you have to start with a goal. But the question that arises immediately after the press release announcing your net zero goal is, "Okay, so now what? What do we do as an organization?" And in cases where the industry is very grounded in the real world, so like energy, logistics, fashion is a really interesting vertical that we're very involved with, those questions are nontrivial. There's a lot of real creative thinking and very large-scale organizational change that has to happen. So we're trying to build the software to help make that possible.

(Joel Beasley at 00:09:04) Now I talked to some Fortune 500 type companies, and they were essentially monitoring their supply chain for slave labor and things of that nature. And then they've identified a section of their supply chain, and then they addressed it. You're not building tools to monitor the ethics of their supply chain. You're building tools that helps them, once they set a goal, have accountability and update on progress towards the goal?

(Derek at 00:09:33) Yes. So accountability is super important, but there's the question of planning in that space is really what we're most focused on. And what we realized as we were thinking about this is that there's a big gap that exists in terms of technology to support planning. So imagine I'm a company that has a big physical footprint. Say I'm doing fulfillment for e-commerce, and I have warehouses, I have trucks, and that's going to generate a lot of carbon. So there's a huge lift to get something sustainable. If I know exactly what I need to build, like I have an idea in mind for, I have thought this through, and I know what kind of sustainable warehouse I need to build and where it needs to be and how the EV charging facilities are going to be laid out, at that point, there's software to do that. That's the world of AutoCAD and, you know, there's very specialist solar planning software that can tell you, to the degree exactly, how to cant your solar panels and where to put them. But between the goal and that point where you're really ready to do an implementation plan, there's this huge gulf of conceptual planning that is not addressed by any tool that's available today.

(Derek at 00:10:43) And typically, people have done that kind of thing, like, what would I do in that situation? What would you do? We'd probably sit down with Excel. In the absence of anything else, as we're trying to think through a complex plan, you know, at some point, you're going to bust out Excel and try and start tinkering with the dimensions of a problem. And that's great for one person, and we've all worked that way. But as soon as you need to bring on a second person or a team or communicate your idea that you're having to somebody else, Excel really starts to kind of feel a little bit creaky because it's not designed for that use case. So what we're trying to think about is this world of conceptual agile planning where you're stepping into this wilderness of trying to remake your business in an ESG forward, positive way. And you're going to be faced with just a continuing procession of forks in the road of, "Well, do we buy chargers or do we lease them? And do we move our facilities to a greenfield location so we can kind of restart the whole thing in a state-of-the-art way in terms of how the facility is laid out sustainability-wise, or do we try and retrofit? Where do we raise financing for this kind of transformation?" All of these questions. And in that kind of bifurcating tree, the state space of exploration gets really large and overwhelming. So what would a better way to do that be?

(Derek at 00:12:15) And actually, as we were talking about this, one thing that all of us, the three co-founders, have in common from when we were growing up, going back to the game inspiration, is that we all played SimCity, and it made kind of an impression on us. I was, you know, at some point early on when we were talking about this, Rajesh and I were realizing that, you know, probably around the very same years, the very same time, literally on opposite sides of the globe, we were both playing SimCity in our early childhood. I have very vivid memories of waking up before a summer job, trying to fit in, you know, sixty minutes on my city before I had to get ready to go into the summer work. So we started, it started as kind of just a fun thing for us to play with of, "Oh, wouldn't it be neat if you could do this kind of planning for large-scale real-world change like SimCity? I could just pick up my warehouse and try it here, try it there, and, you know, see the numbers showing me some reflection of is this a good idea or not?" And the more we thought about it and the more we kind of workshopped it, it gradually morphed from something that was just fun for us to think about to being like, "Oh, well, maybe if you could do that, if you could have something that was that understandable and tactile and communicable, but it was supported by real scientifically grounded models so that it could give you quantitative predictions that weren't toys but were really good projections, that would be incredibly powerful."

(Derek at 00:13:32) And that's what we have been working hard to build over the last several years. It's like, can we bring that kind of planning and that kind of motivation, really, because these are hard problems that take a long time to solve. So people have to be working on something that feels better to work with than Excel. No offense to Excel. Again, it's a great tool. But we're talking about both the frontiers of complex planning and the frontiers of helping people not feel defeated by these massive problems. And that requires a very different kind of solution.

(Joel Beasley at 00:14:07) Yeah. Can you pick up and drag and drop buildings and do that stuff in your software?

(Derek at 00:14:11) We are working on that. We started with street lights. That was the very first thing, just to get that feeling of, can we make a model where you drop a node of the model, basically, onto a map? And the node at that point has to kind of suck up some information about its environment. It has to get baked into the map in some manner, and then use that to make predictions about its energy consumption and its cost and things of that nature. So street light model was actually the very first thing we built. And the most cutting-edge things that we're working on now are actually in the fashion industry and wool in particular. So we're closer to picking up sheep and moving them around than buildings at the moment. But same principle, and that's been really exciting to see that starting to go from early prototypes to something that's now being used to really drive planning at some large, really large consumer fashion brands.

(Joel Beasley at 00:15:07) Oh, nice. So you're actually in at some companies. You've got users in the wild and all of that.

(Derek at 00:15:12) That's right. So we have a partnership with a really wonderful company in New Zealand called the New Zealand Merino Company. And they're basically, they have revitalized and are really helping to drive the wool industry in New Zealand. And when you see a map of the farms in their network, and we're talking like 400-something farms over three and a half million acres of land on a comparatively small island country, it's a huge part of the social fabric of New Zealand, this kind of agriculture and the wool growing in particular.

(Derek at 00:15:44) So working with them since about November of last year, and what we've put together so far is an acre-by-acre plan for that three and a half million acres that is focused on regenerative planting. And the goal here is, like, sheep are the big culprit—no fault of their own—but sheep are really intense carbon emitters because their manure gives off CO2 equivalents. They're churning up the ground and grass. They have this enteric fermentation, like cows. You've probably heard about, like, cow burping controversies of various kinds.

(Derek at 00:16:15) So they're emitting CO2 and CO2 equivalents from their gut. And when you have three and a half million acres of sheep that are supplying, like, some of the world's biggest fashion brands, that winds up being a quite substantial amount of carbon. But it's also—and this is the part that we're working on—like, a large amount of land. So the question is, if we manage that land really cleverly and made the optimal use of areas that are not being used for the sheep, could we inset carbon? So instead of, like, buying offsets somewhere else, the vision is, can we make the land itself sequester as much carbon as the sheep emit so that you transform this from a really carbon-heavy industry into something that is actually neutral?

(Derek at 00:16:57) And the first cut of the plan that we've worked on with them, not finished by any stretch, has achieved through replanting—so doing some computational modeling about, like, where could we put native forests, where can we fit them in into these properties in places that make sense—we can achieve around a 50% year-over-year reduction at the start of a growth program, escalating to around 70%. And that's huge.

(Derek at 00:17:21) That's equivalent to, in terms that are easier to think about rather than just tons of carbon—that would be equivalent to if we could just wave a magic wand and replace every vehicle in San Francisco with an EV. That's an equivalent amount of CO2 reduction. So we're incredibly excited about that because it's the rubber meeting the road for theory into practice here and saying that, like, in a global industry, we can actually achieve reductions that are material, not just nibbling around the edges. And that's really exciting.

(Joel Beasley at 00:17:53) Oh, that's pretty cool. So did you factor in, when you did the modeling for that, the amount of carbon it would take to actually plant the rainforest?

(Derek at 00:18:03) Yeah. So the way we think about these models—and this is really important, actually—is that there's a temptation with these things. Ironically, it can be more tempting for really high-functioning organizations to think in terms that quickly expand into kind of boiling the ocean. And there's a term that really has a lot of imagination attached to it at this moment called "digital twins," and the idea of, like, can we make a digital twin for, you know, a thing? And I, as an engineer, like, I completely understand the appeal of that. Like, it's, oh, yeah, that would be fun to build that. But if you think about it, for a complicated problem, if you succeeded in making a digital twin which embeds every aspect of the real world, you now have a simulation that's as complicated to reason about as the real world. And that's not what models are supposed to do. Like, models are supposed to distill and reduce complexity so that we can focus our attention on kind of the most important causal levers.

(Derek at 00:19:01) So when we're working on models with our customers, what we try and emphasize is, let's start with something simple, and then we're going to layer complexity onto that. Like, we're making this beautiful cake, and, you know, you start with just the sponge, I guess, the inside of the cake, and then we're going to gradually embellish. So in our case, we've started with really focused on getting the planning right about where can the forest go and making sure that it doesn't impinge on other things that the farms need to run. And then being able to total that up across these 400 farms and get a picture of, okay, roughly speaking, where are we? If we went all in on native planting, how far could we get? And now that we know the answer is, oh, that's pretty far. Like, that's farther than we were expecting at the outset. Now we can dig in and start saying, okay, now what's the next most important causal lever that we need to build into this thing?

(Derek at 00:19:54) And one of those is economic in terms of the planting—like, how much would it cost and where could that money come from. And another one is about, kind of the what you might call the fugitive emissions from a process of planting. Like, as you're driving the trucks up there, there's going to be emissions that are incurred in the course of that planting. That one, fortunately, from what we've understood in the rest of the model, is going to be pretty insignificant relative to—because the sheep raise the carbon stakes so high that, actually, we don't even at this point even need to factor in things like the farm equipment in terms of the carbon budget because those are in the noise. The sheep are such a significant driver.

(Derek at 00:20:32) Anyway, that's a long-winded answer to that question, but it's an important lens into this idea of, like, reducing complexity and being able to defer or let go of dimensions of the problem which might seem super important at the outset, like, from our engineers' minds. But once you get a better understanding of the magnitudes of the numbers and the factors involved, a lot of it you can kind of cleave away. And that's super important for all these companies that are facing these really heavy lifts, because if you start with a "boil the ocean" approach, you're going to fail. Like, you just are. So you have to be able—

(Joel Beasley at 00:21:07) People love the term "digital twin," Derek, so you know you've got to do it.

(Derek at 00:21:11) I get it. I love it too. But—

(Joel Beasley at 00:21:13) Have your marketing team look—I'll solve the problem for you guys right now, and you guys just send me a check. Okay? Have your marketing team call it a "low-resolution digital twin." Yes. We have digital twins. They're low-resolution digital twins, and we increase the resolution as time goes on.

(Derek at 00:21:28) That is pretty much exactly what we tell our customers. You would be surprised. When we've talked to these companies, I feel like in our customer development conversations, of course, the most important thing that we bring to the table is our technology. But there's also there's a little bit of a therapeutic relationship that can take place as well in the sense that many companies that have made these pronouncements have been stuck for twelve months, eighteen months beyond, like, making a commitment, and then the realization of the magnitude of the change hits.

(Derek at 00:22:02) And they get stuck in a really deep rut of analysis paralysis because, you know, when you have this huge problem to solve and it's one you haven't dealt with before, like, where is the end of the thread? Like, where can you start beginning to reel in and make some progress? So in fact, like, when we're kind of preaching this different way of thinking, this new kind of sustainability modeling gospel to these customers, it's about empowering them to say it doesn't have to be perfect. In fact, it shouldn't be, because if you try and make it perfect, you're going to stand still for another eighteen months while your competitors potentially make progress. And we truly believe that the transformation to an ESG economy is a crucible in which some companies are going to leap ahead and succeed and set themselves up to be dominant in the coming decades, and some are going to flatline.

(Derek at 00:22:55) So the idea of prizing action and forward progress over perfection is critical for everybody dealing with these kinds of sustainability issues because we're on a ticking clock at this point, and pragmatics and forward motion is going to carry the day.

(Joel Beasley at 00:23:12) Well, what happens if, like, I've seen these contests. I know carbon's a big one. It's more dynamic than that than just carbon, but that's a big one. That's a lot of where the conversation starts. And there's been these contests, and there's been these devices built that can suck carbon out of the atmosphere in a relatively short period of time. We've put the challenge out and have gotten a response. Obviously, there's all sorts of questions in terms of how do we make them more efficient and cost less and all this stuff. But if we have that ability to then, essentially, as a planet, regulate our carbon in our atmosphere, then does this stuff still matter?

(Derek at 00:23:54) Well, until we have a way of applying those kinds of innovations at scale over a reasonable time horizon—like, I wish we could live in that world, but I don't think realistically we do because we don't have the economic resources to put, like, state-of-the-art carbon reclamation facilities, like, everywhere that's going to need them. So we have to work with the tools that are kind of closer at hand. And one of those tools in New Zealand, for example, is a tree, which is a lot less expensive. It's a matter of, like, you know, can we build a plan that allows us to use the pieces that we have right now that are economically feasible and that we can deploy at scale without any additional weight on our organization? Can we use those to start making progress?

(Derek at 00:24:45) So, absolutely, these kinds of the super cutting-edge approaches that you're talking about will have a place as, like, focused kind of pillars in scenarios that are hard to get traction on otherwise. But when you think about the tens of thousands and millions of sites in the world that need some kind of remediation, you have to have a really broad approach that admits all kinds of improvements and not ignore the ones that are easier to implement and potentially, like, lower impact, but much lower cost and much easier to get in motion. So it's an inclusive approach, I guess, is what I'm saying, rather than one that we think is going to have, like, a magic kind of key.

(Joel Beasley at 00:25:31) Yeah. I like the fact that as a species, we're taking a multi-threaded approach to solving the problem. Right? No one's, like, sitting there and say, I'm going to spend my time developing some sort of credit card app because this person over here won a million-dollar prize on sucking the carbon out. Like, you say, this is who I am, these are the skills I have, these are the resources around me—what can we do today? And so I absolutely, I love that. And I love the fact that you doing that and those other people doing that, ultimately, I believe it'll get us to where we want to be faster. So I think it's pretty great all in all.

(Derek at 00:26:09) Yeah, absolutely. I mean, we're trying to create the canvas for planning and thinking here. And there's all kinds of paints that are going to make interesting splashes on that canvas as we work to solve these problems. But getting the mental canvas out there that an organization can use, these large enterprises that are going to carry a huge amount of the weight in making these changes—getting a canvas that we can all look at and work from together is going to be super duper important, and that's the problem that we're working to solve.

(Joel Beasley at 00:26:41) Now I want to talk about the term "ESG" because just to make it super clear, I 100% care about the environment, super into, you know, I have kids, want the world to be good for them. I value multiple different approaches, all of that type of stuff. Recently—and I noticed you use the term "ESG" a lot and, like, your marketing on your website—and I think, you know, five, six years ago was when I noticed that term start to come about, and it wasn't controversial at all. It was just like, oh, we're the ESG team, and we're the people at the company that are trying to figure out, like, how we not kill the planet or whatnot. And then I think recently, it's become more, like, politicized. I don't know if that's the right word.

(Derek at 00:27:22) Yeah.

(Joel Beasley at 00:27:22) But Elon Musk came out, you know, a couple months ago, and he was like, "ESG is garbage." And there's been some controversy around that term. How have you, as a co-founder—you know, it's so important because I'm a founder too, right? I'm a business owner. And you have to go where the budget is, and you have to align your product with the terms that the people who are spending the budget—so if you're an ESG product, you need to brand yourself as ESG because those are the people at the company that are going to purchase your product or work with you. But as this term has become, I guess, controversial, for lack of a better word, how have you looked at this emergence of people being split and not liking ESG as a co-founder?

(Derek at 00:28:03) Yeah. I think some of the pushback on ESG that we're seeing at this point is actually quite healthy for the space. And my reasoning there is that we're going right now through a transformation where we're moving from ESG as something which was a, you know, a nice set of pages that got bolted onto a company's quarterly report, and it, you know, probably has some nice pictures of windmills, and you're talking about, like, you know, how important it is to your company. But it doesn't answer the question, what are you doing? Like, what does that mean operationally for the company? And I think that the pushback on what might, as a kind of collective term, be called "greenwashing," as I'm sure you've seen that term bandied about in these conversations, is totally valid because what we've learned—and I think the markets have learned—is that ESG claims these days are material to companies. There's studies that we've looked at that show pretty definitively you can raise capital less expensively if you have a strong ESG posture than you can if you don't. And, you know, some companies have seized on that by saying, okay, well, we can kind of fake an ESG plan or we can just act like we have one, and maybe that's the easiest way to do this. There's always going to be actors like that, right, in any kind of complex space that involves real commitments. And so what we see Actual is doing is building a platform that's going to help the companies that are the good actors distance themselves from the companies that are just prattling and not making any material progress.

(Derek at 00:29:20) So really we're about turning ESG into a verb, if you will. Like, it's something that you have to do. Like, you have to walk the walk and get us out of the space where ESG was this kind of fuzzy abstraction which seemed like the right thing, but companies didn't really have the tools to dig in and make that like a thoroughgoing part of their operational models. So the pressure to operationalize is quite healthy. And we think a platform like Actual is going to move ESG away from the space of being sort of a nebulous commitment that people don't really understand and that might not be that impactful to what it needs to be, which is something that is about transforming for the next phase of the global economy.

(Joel Beasley at 00:30:25) Does your software do anything for—it sounds mostly like the carbon emissions and the sheep and all of that. But also lumped in with the ESG is a lot of human rights-related type issues.

(Derek at 00:30:38) That's right.

(Joel Beasley at 00:30:38) Does your software go over there at all, or is it just focused on, like, the material carbon type stuff?

(Derek at 00:30:43) No, we're very deliberate about the fact that we don't want to build just a carbon tool or just a tool for water or any of the other kind of subdomains that roll up into ESG. And in fact, I think what we've learned really is that it would be difficult to do that well in any one of those verticals without touching many others, including the ones that are about the S in ESG, like the social impacts. The reason for that is straightforward. It's just, you know, the fact of the way our world has worked is that things that are polluting, things that have a really negative environmental effect attached to them, they don't land in the wealthiest areas.

(Derek at 00:31:26) Right? Like, these are not things that get put in in well-to-do places. They get pushed into regions and into places that have less political power, and that tends to correlate with lower economic power. So solving these problems, solving the environmental sustainability problem by its nature, because of that is going to touch social issues. And so we're really serious about making a general purpose toolkit.

(Derek at 00:31:55) This is really built into the design of our architecture that you can point at all kinds of different challenges. We've worked, for example, on medical center models that are about, you know, how much increased medical service can we bring to a region that doesn't have it. And the calculations that we're doing look a lot different from sheep on a wool farm in New Zealand, but it's the same computational toolkit powering it. And that's really by design because we want to be able to grapple with the horizontal breadth of these really complicated problems, not just the narrow vertical piece as you would get if you were building a specific carbon tool, for example.

(Joel Beasley at 00:32:34) Okay. Can you give me a more detailed example of the social type modeling?

(Derek at 00:32:39) Yeah. So one of the projects that we've been most excited to be a part of and has just been a wonderful effort is work that we're doing with an organization called Giga, and their mission is to bring the internet to every school in the developing world. So that's their vision. It's like literally every school, anywhere, 100 miles away from civilization, a tiny school, how can we build a world where that school has broadband internet? And we've been building models with them about what it would mean to pick a country.

(Derek at 00:33:13) And we've been working with some countries in Africa in particular that have very low internet penetration in their rural schools and figuring out what would it cost to deploy internet to all of these places and how do we solve the kind of infrastructural hurdles that are there. So these rural schools, for example, you can't just bring a router and plug it into the wall because there's no power, typically. So to add the internet, you have to figure out a power story. And of course, that power story to be sustainable can't be a diesel generator. It has to be something to do with solar.

(Derek at 00:33:45) So there's a very intricate kind of mini puzzle for each of these schools, and we've worked on doing the modeling to solve those mini puzzles at scale. And then importantly, being able to roll that up into a cost model that would allow countries to think about financing in a way that is orderly and that would make sense to external investors. So that's been really exciting and an example of the ways in which we think of sustainability as about more than just carbon. It's about human sustainability. And in some places, that's about education, and that's something that we're just thrilled to be working on.

(Joel Beasley at 00:34:24) Hey, there you go. And now you get to leverage your co-founder's financial services experience and...

(Derek at 00:34:29) Exactly. Yep.

(Joel Beasley at 00:34:29) Make money as a loan originator.

(Derek at 00:34:32) Well, many of these... Yeah, I mean, there's a ton of financing sources for these things that go beyond kind of private markets. So thinking about organizations that really are about international development finance. And they need financial models too. And that's one of the things that I think is really healthy in the work that we're doing here is to try and bring clarity to financial modeling that goes beyond kind of fuzzy philanthropic thinking.

(Derek at 00:34:58) Not that there's anything wrong with philanthropic thinking. I don't want to make it sound like that. But it's about clarity and accountability. If we're going to invest a huge amount of money into an international development effort, how do we have a plan against which we can make sure that accountability is emerging and that the things are happening that are supposed to be happening and that the money isn't disappearing into a sinkhole somewhere that can kind of go unseen because the planning isn't clear enough.

(Joel Beasley at 00:35:26) Yeah. Well, I love what you guys are doing. You're basically making tools to allow people to achieve their goals in an easier way than existed before. So I like the flavor. I like what you guys are doing, and I think it's super cool that you've taken the SimCity approach.

(Joel Beasley at 00:35:42) And you know what? Right when you said that, it made the style of the graphics on your website make so much more sense.

(Derek at 00:35:48) Yeah. Yeah. Exactly. I learned recently when we were talking about this and talking about it with customers that SimCity 2000 is actually part of now, like, the MoMA. MoMA has it in their collection.

(Derek at 00:36:00) It was added as part of an exhibit on design and childhood in the twentieth century. And I don't think that's a random inclusion. Right? It's something that it's been an incredible learning for me talking with people doing all kinds of jobs across many industries. And, gosh, I would say eight times out of ten when you mention SimCity to somebody, they get that kind of sparkle in their eye, and you know that they are imagining—they're seeing themselves having some intersection with this game at some point.

(Derek at 00:36:33) And for me, that really speaks to, you know, why do kids play with blocks, for example. There's something elemental and wonderful, wonderfully human about taking a complex vision in your head and being able to materialize it in a tangible way in front of you. And blocks are one way of doing that. SimCity was another way that retained that kind of essence of tangibility because of its really clever graphical style and the affordances of the interactions. And that same DNA underpins what we're building, to bring that same sensibility of, like, I can make a complicated plan and I can communicate it in a way that has some charisma, and that you don't have to be a world expert in solar or carbon accounting to see the potential in a vision that's built on a platform like Actual.

(Derek at 00:37:21) And we think that's essential for solving these problems.

(Joel Beasley at 00:37:25) I want to switch gears real quick as we start to wrap up. You had written an article about the hidden structure of over-imitation in kids. It's completely separate from this conversation. I was curious. As I was reading it, do you have kids?

(Derek at 00:37:39) I do. Yeah. We have a young daughter.

(Joel Beasley at 00:37:42) What are your thoughts on, like, did that help inspire you, or was this written before your daughter or what?

(Derek at 00:37:51) Yes, it was written long before, but it's based on some really striking work. I mean, the single most striking thing—and this is why I did my dissertation on it—the most striking paper I read in graduate school, which, you know, when you enter a PhD program, you're sort of like, where is my—when is that cosmic moment of inspiration going to strike where I will see a problem and be like, that's the one. Like, that's what I want to invest all of this time and effort into solving.

(Derek at 00:38:18) And for me, it was a paper by Vicky Horner and Andrew Whiten, who are some primate comparative researchers in the UK. And they did this experiment where they demonstrated a simple series of actions on a little kind of toy to chimps and to little kids, kind of preschool age kids. And the absolutely amazing finding, which was just—it unrolls so many questions—is that, and sorry, I should back up and say that the sequence of actions that they demonstrated for both of these groups, some of them were required. They were goal-directed actions that helped to kind of open the toy and get a little prize out, and some were totally irrelevant.

(Derek at 00:39:01) It'd be like, you know, stop and tap a stick on your head and then continue with what you're doing. And what they found was that the chimps were not fooled. They totally omitted the irrelevant actions and just went straight for the shortest kind of causal line of, like, what do I need to do to open this toy? The children, on the other hand, reproduced all of those extraneous steps. So it's this amazing result in which suddenly you have a population of chimpanzees that are behaving in a way that's materially smarter on some kind of axis than children.

(Derek at 00:39:34) So why is that? What's happening? So the work that I did in my graduate program at Yale with Frank Keil and Laurie Santos, two wonderful advisors and incredible researchers, was to really dig into that question and unpack—is it, you know, the question is, are the kids just being kind of, they're just being a little bit dense, or is there something else going on? And that's what we focused on for my dissertation.

(Joel Beasley at 00:39:59) So it wasn't just because the monkeys were smart enough to, like, they just wanted the food.

(Derek at 00:40:03) No. It's a really interesting scenario in which all of the social learning that we're so well adapted to doing, all of the learning by watching. And in some respects, the irony is that this kind of observational learning is one of the things that really differentiates us from other primates and has been the scaffolding that's allowed human intelligence to evolve so quickly, that kind of social learning ability. It's getting confused in a situation like this because the kids are encoding the intentional action that they see as something that must be important because the human's doing it intentionally. So in a sense, it's kind of like the social part of their reasoning is overriding the causal.

(Derek at 00:40:46) And so it's kind of like a glitch. It's like a bug in the program where 99.99% of the time that program is incredibly adaptive. But in this one odd circumstance, you can see the bug. And just as in software development, often, you know, the bugs are really revealing of the larger structure of things many times. You see structure that you wouldn't see in a program that's operating smoothly.

(Derek at 00:41:10) And it's the same thing with human cognition in some of these cases, and that was what was really fun to figure out.

(Joel Beasley at 00:41:17) That's so cool. Well, you got lucky with a girl. I've got a girl and a boy and another boy on the way. Man, this is great. Is there anything that you wanted to get out there that we didn't cover already?

(Derek at 00:41:27) Yeah. So two things. One is that in our space, in the ESG space—and this gets to a question that you asked about, like, the pushback on ESG—one of the things that I think a lot of the customers that we talk to are still learning and that's really important for people to think critically about is the difference between accounting and reporting and having a plan. And there's a lot of tools in the ESG technology space now that are very focused on accounting and reporting, like getting a very precise measure of your carbon footprint, for example.

(Derek at 00:42:01) And that's valuable, super valuable, but it doesn't replace having a plan. Right? Like, if I can measure exactly precisely how many miles my car is going to go before I run out of power and I'm on some rural road, like, it's good that I know that, but I need a plan. Once I know exactly how many miles it is, now the question is like, okay, what are we going to do about that?

(Derek at 00:42:25) So that's something that I just think is really important for people who are working at these companies that have these ESG commitments to think critically about. Set the goal. It's fine to have measurements that help you understand where you are today, but don't lose sight of the fact that at the end of the day, you need a plan of action. And that's something that can get overlooked, I think, as we're starting to learn about this collectively. And lastly, we are hiring. So we're looking for leaders and engineers and people who are passionate about all dimensions of this problem.

(Derek at 00:42:57) We're very excited to meet those people and tell them more about what we're working on.

(Joel Beasley at 00:43:01) What is your website?

(Derek at 00:43:02) It is actualhq.com.

(Joel Beasley at 00:43:05) And then I'm assuming you have a careers tab or something of that nature?

(Derek at 00:43:08) That's right. Right off the homepage, you'll find the About Us and Careers. And it's been one of the things that gives me real hope and excitement about this problem is seeing the number of people who have done work of all kinds in technology and other fields who are at a point in their career where they're like, the next thing I do, I want to do climate. Like, I'm doing a climate search, looking for climate companies, and that's wonderful to me. Not that everyone has to work on this, obviously, but, you know, we need the best and the brightest.

(Derek at 00:43:37) This is our moonshot. Like, this is this generation's moonshot. Absolutely. But it's going to have implications that ripple for generations, and we've got to solve these problems. So it's wonderful to see so many people kind of ready to pick up their work implements, whether that's a keyboard or a pen and really dig in.

(Joel Beasley at 00:43:58) Yeah. As pessimistic as it can sometimes feel, I'm an optimist that I believe that ultimately we want good. I think most of the differences and issues are communication differences. I think most people agree on the destination that we want to get to. There's just a lot of disagreement on the path to get there.

(Joel Beasley at 00:44:16) And sort of some of the cultural rules to govern us as we take the journey.

(Derek at 00:44:22) Yeah. And defeating that sense of it being hopeless is so important. Right? That's—and I think anybody who's worked in the space or even just existed on planet Earth at this time has felt that just weight of, like, are we just stuck? Like, is this just the end?

(Derek at 00:44:39) And nobody solves a problem like this from a place of hopelessness. So that's one thing that I hope we bring to our customers and to anyone who we have an opportunity to talk to about this work is, like, let's start from a place of hope, roll up our sleeves and understand that these are huge problems, generational problems. But we can make progress if we just begin. And, you know, don't make the perfect the enemy of the good as we talked about earlier. Let's just do one step at a time and understand that it's a long road, but let's maintain hope because that's how we're going to get out of this hole.

(Joel Beasley at 00:45:13) Boom. That's a mic drop moment, Derek. And we made a podcast. How do you feel?

(Derek at 00:45:18) I feel great. Yeah. Thank you for a wonderful conversation. I really enjoyed that a lot.

(Joel Beasley at 00:45:22) Thank you so much for listening. And if you found this episode useful, please share it with a friend or colleague who you think would get value from it. And if you have topics you'd like to hear discussed on the podcast, either add me on LinkedIn or send me an email, [email protected]. Every time I get an email or LinkedIn message, it absolutely makes my day and inspires me to keep going.