The Exchanges

Q There's cigarette butts, there's arsons. So I'm a little bit curious how you think about, you know, what do you actually do to prevent things from starting in the first place?

A I think, um, the first place to start in my mind is the utilities. So utilities cause about 11% of ignitions, but those ignitions cause 50% of the damage. And why is that? It's because the same sort of high wind conditions that cause massive fire and negative fire conditions also cause utility equipment failures and lines to fall and stuff like that. For utilities, there's things that they can do. They can do vegetation management, basically trimming trees along power lines. You know, our fund has an investment in a company called Overstory that helps utilities, um, prioritize where they're going to trim these trees, uh, for sort of maximum effect. There's an acronym called PSPS or ESPS, which is public safety power shutoffs or enhanced safety power shutoffs. These are basically de-energizing lines in the, in advance of a, a red flag event, having more sensitive breakers on the, on the circuit so that if there's a short, it de-energizes quickly. They're not very popular with people. People don't like to have their power shut off, particularly before a big wind event, but Um, it can be a big, uh, improvement for safety, and then there's undergrounding and, and things like that as well, but those are very expensive. You know, undergrounding can cost three to four million dollars a mile, and so that, you know, manifests in, in larger, uh, electrical rates. If you can fix just util…

AI assessment note: “the first place to start in my mind is the utilities. So utilities cause about 11%”

Q You did mystify one other combination issue between set of corporations and regulators. Um, there's been a bunch of anger about, like, it's very hard to get fire insurance in large parts of California. I think there is a perspective of, like, the insurers are evil for not insuring, um, large areas. You just started an insurance company. Like, can you explain this?

A Insurance rates in the admitted market are regulated, right? And so you have to basically file a rate sheet with the regulator. They say, yep, you're charging an appropriate amount, not too much, not too little, and you go sell that, you know, policy out in the market. But you were not allowed in those rate applications to include the cost of reinsurance, and you had to use historical models, not forward looking models. And so those are like two massive issues because the cost of reinsurance in California has at least doubled, maybe tripled over the last five or 10 years. If you have a cost that just tripled and you cannot pass it through, I mean, that's like sort of a, Crazy thing, right?

AI assessment note: “Insurance rates in the admitted market are regulated, right? And so you have to”

Q If you were to do one thing as a homeowner to protect your house going forward, what would you do?

A Um, I'd probably just defensible space. There's sort of this concept of zone zero, which is the first five feet around your, your structure. That should be clear of any flammable materials. It is not in most houses. There's landscaping and azalea bushes or whatever. Um, and, and, but if you can remove that, um, that has a pretty significant impact on your home's Uh, propensity to burn. Um, probably the next thing would just be, uh, a good water source. So that again, it can be attractive for, um, a fire department to, uh, to actually defend your home. But if you have, if you have defensible space and a good water source, um, you're, you're in the top quartile.

AI assessment note: “I'd probably just defensible space. There's sort of this concept of zone zero”

Q was a 17 and a half million dollar budget Terry cut for the fire department, uh, by the incoming mayor. And then there was some claim around a lack of training, lack of personnel, and other issues as well, in addition to a lack of water. And so it sounds like it was sort of this multi-pronged issue beyond just access in. What do you think about those different factors?

A Yeah, I mean, certainly water was an issue. Um, you know, there's been a lot of like kerfuffle on Twitter where people are claiming that because of the water bill that didn't, wasn't acted on, that that somehow was related to this. I don't think that is actually true at all. Like really, The water issues were related to there's three, one million gallon tanks, um, as houses burned down, the plumbing opens. If you've got like a five eighth or half inch plumbing connection into a house, that's going to run at 20 or 30 gallons a minute. You have 500 of those going, you've got really significant water flow and pressure drop. And so those water systems are just not really built for sort of these urban firestorm, uh, environments. So, you know, there's plenty of water in the state of California, at least sometimes, um, and there was here, but, um, You know, I think the water issue was much more about the scale of the incident. Access was an issue. In terms of staffing, that's not my area of expertise. You know, in the scale of the LA Fire Department budget, I don't think seventeen million dollars is really all that much. Um, in California, we have some of the best resourced fire agencies in the world. Cal Fire's budget is, I think, about triple what the US Forest Service budget is. In my opinion, we are relatively well resourced, at least compared to most of the other areas. I think …

AI assessment note: “in the scale of the LA Fire Department budget, I don't think seventeen million dollars is really all that much.”

Q the state of California and some nearby states where similarly we've seen sort of these giant fire outbreaks. And so I was hoping maybe what we could start with is just an understanding of like, what are some of these contributing factors besides climate and how should we think about them and how have things changed over the last few decades in terms of what people have done for them?

A Happy to go there. Maybe what I'll just say real quickly, though, first is that I think in even the climate investing realm, there's some big changes happening. You know, I think if you look at climate capital that's deployed, 98% of it goes into what's called mitigation. So reducing CO two, two percent of it goes into resilience and adaptation. And I think what we are seeing is the pendulum that is swinging rapidly, where now I think climate and climate investing is Very much starting to be inclusive of resilience and adaptation. I think that's a good thing. And I think it sort of acknowledges the reality because I sure we should emit less carbon. That would be great. Um, but we need to deal with everything that's been emitted in the changing climate. And so I think that that's, that's a very positive thing to your question on what else is causing wildfire. I look at it as, you know, sort of a couple of factors. The first, and in my opinion, the most important one is just that fuel density or force density is, has increased Three times since, uh, you know, really in the last hundred years. Um, basically starting in the 19 thirties, the U S forest service implemented this policy of what they called maximum suppression. And they rolled out this like very famous, 10 AM policy, which meant that you hear about a wildfire and it's gotta be out by 10 AM the next morning. You know, th…

AI assessment note: “to your question on what else is causing wildfire... fuel density or force density”

Q optimally help accelerate the recovery of, uh, Palisades or other parts of LA that are affected? Is it building code changes and sort of review processes? Is it, I don't know if there's like some toxic environment left behind that needs to be cleaned up. Like how do you, how do you think about remediation in as rapid of a timeframe as possible and what are the components of that?

A Yeah, that's a good question. And, and there's probably a little bit less in my area of expertise, but, you know, certainly after large fire incidents, there's cleanup that's needed. And, and a lot of, there are a number of chemicals from firefighting chemicals, from housing, you know, all this, this is kind of nasty stuff that needs significant cleanup. I do think we should seize this as an opportunity to rebuild the right way, right? Like the Palisades is a beautiful place. People are going to want to live there. We should build it, rebuild in a safe way. And there's going to be pushback. A lot of these houses were not insured We're underinsured, and so it's going to be very expensive to rebuild. Rebuilding to a higher standard is going to be, um, you know, difficult, but if we don't do that, we're just setting ourselves up for this to happen again. And so, you know, my vote would be, um, that we really take the, the sort of building code opportunity really seriously when all this construction does happen.

AI assessment note: “we really take the, the sort of building code opportunity really seriously”