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CEO

The Growing Awareness of Water Value

Jul 29, 2022 10:17:27 PM

With the economy progressively shifting to a commodity-based future, will anything out-value water? We doubt it! That's why we launched Water on Demand™… And are creating an investor-funded network of self-sufficient, pay-per-gallon businesses, human communities and other independent end-users, How do YOU fit into this vital movement to bring clean water access to all people? Find out in the briefing!


Transcript from recording

I'm Riggs Eckelberry co-founder, chairman, CEO of OriginClear. The government needs to continue to provide a lot of abundant clean water, but what happens to it after it's used when it's dirty? Do you know that 80% of all sewage is never treated, it's just dumped? That leads to water scarcity, but it also leads to a lot of disease and pollution, the ocean turning into something horrible. The same time, the cities and counties are not getting the funding they need to really treat the water and so they can't keep up.

The solution is let the people who use the water clean the water. Water on demand is investment in actual capital assets that earn income. Sign up to hear my weekly briefing every Thursday night. 5 p.m. Pacific, 8 p.m. Eastern. Just put oc.gold/ceo in your browser register for the briefing and I look forward to hearing more from you.

 

Introduction

Riggs: Hello, everyone. What a great, great Thursday. We have so many good things happening. Ken and I were just talking before the show about how things are just speeding up so much. Things are really, really coming true. And I'm going to give you some very good specifics in this briefing. So without further ado, I'm going to jump right in here.

 

title


171st briefing. Yes, there's a new beneficial income asset — water. If there's one thing we do well as OriginClear, it will have been to have created an investable asset for the first time called water. Yes, you can buy shares in water companies or you can buy municipal bonds, but no where you can invest in the water equipment asset, than in Water on Demand, which I'm so proud of.

 

Rio Grande


Running Dry

So this week I featured a story, "The Rio Grande is running dry." Now, to be clear, the southern Rio Grande has often run dry, but this is up by Albuquerque, way north, and it's just puddles. And as you'll find out shortly, a lot of this is due to the fact that we just throw away all our water.

Now, the Rio Grande itself being dry doesn't come from us, not recycling, but certainly the Colorado River going into Lake Powell and Lake Mead. That is a problem having to do a lot with consumption and we don't recycle our water. Now, I'll tell you a bit more about this story in a second, but let me give you another piece of news.

 

1M  Californians


Toxic Tap Water

Long term health issues in California. Now, let me tell you, I'm not singling out California. They merely happened to be reporting this. Right. This is the canary in the coal mine. All of the states have this problem.

 

drinking water


But this report, which is in The Hill, which is a, that's the Washington, D.C. political, Congress magazine, is talking about how there are more than 370 failing water systems across California for about a million people. And two thirds of them are in disadvantaged communities, of course.

 

at a glance


Arsenic and Nitrates

So what is it all about? Well, the acting state auditor issued a report and the excessive levels of arsenic and nitrate, which can be very bad for your health. Again, this is some details about how it was all put together. And here is the real issue.

 

no funding


Lack of Funding

They may say they can have a problem, but they don't have the money. This is, I don't know why we spend billions and trillions and billions and billions on everything, but. Municipal water. And so there's a gap. And this is exactly why we're doing what we do.

 

arrow 2


Compounds

The lack of fund compounds, because there hasn't even been any performance goals or metrics. And of course, the longer they wait, the more expensive they get. And onward and downward. Not a pretty picture. So the timeline but you know, basically it'll it'll go away. It's a terrible thing. All right.

 

PR title


Company Announcement

So sure enough, we issued a an announcement this week that talked about the fact that cities are mandating onsite recycling.

 

SRTP-HDPE


And this is a picture of our high density polyethylene systems. This is a pump station that's being molded, and our systems are designed perfectly for it. They are decentralized. The very first one, Dan Early came on board in late June of 2018 and July I think 27th, we announced this first brewery program and sure enough, we were off and running.

 

Unique Approach


Now, Dan had been doing a lot since before that, so he was toiling in the wilderness for a long time. Until he came along to join us. And even then, it took us a long time to get up to speed. There we go. We received purchase orders in one month that nearly equaled the entirety of 2021. So that's really starting to rock.

 

Rising demand



The rising demand for Modular Water Systems to reduce the need for municipal sewage connections. And this is what's happening.


 

Recycling mandated


This is the law that NBC reported on. Every new building over 100,000 square feet must recycle its own water. Toilet to tap. And La, Denver, Austin, Texas, and New York City. I've been talking about this, but this was the big announcement this week and it's great.

 

Case study


But of course, we've been doing that for a while. We have a case study on our website about that cool thing we did in Pennsylvania. We've done a lot more. It's only one of many, but it's a case study that shows how it was done and this dealership was able to relocate into inexpensive land by putting in place a closed loop black water system, Blackwater, meaning the toilet water.And of course, we talk about how Water on Demand can accelerate that.

 

About OC


Mission Statement

Now here's a new statement of our mission. We're kind of restating everything. Once a government monopoly, clean water is going private, driven by decades of governmental neglect and soaring water rates, local industries and communities are now treating and recycling their own water. That's good for business and good for sustainability. And now the innovative fintech water on demand is providing capital to enable this megatrend.

For the first time, clean water has become an investible asset open to Main Street investors with the potential for generational royalties. And we are The Clean Water Innovation Hub™ for Water on Demand and for Modular Water Systems, a leader in onsite pre-fabricated systems made with sophisticated materials that can last decades. I'm going to tell you more about these sophisticated materials. You're going to love it.

 

letter content 1


Shareholder Letter

So I want to show you a draft of our Q3 shareholder letter. But just the first part, there's a cliffhanger. So again, I talk about this problem with the million Californians and that I'm not running for office, so I can't fix the government. But our focus on the smaller, local water user is paying off.

And what follows here. Is going to have to wait because it's a major announcement. But let me just say this. From here on out, the current investment round for Water on Demand is going to become less generous because of the announcement that is implied here. And I'm just going to have to tease you on that. I'm sorry. It's just how it is. Okay.

 

2nd most popular



So we appeared on a podcast and this is a very excellent podcast and we were actually number two all time popular out of 42 podcasts by this five star podcast by John Ricard.


 

Wealth & Freedom


So let's listen to what was said that was so popular.

'

Start of presentation

Riggs and John


 

John: Good morning, afternoon or evening, depending on when you're listening to this. This is John Ricard, your host, as always, of the Wealth and Freedom Nexus podcast. And today I actually have on Riggs Eckelberry of OriginClear. And this might kind of surprise a lot of people. You've probably heard investment opportunities in real estate or crypto or precious metals or oil and natural gas are going up quite a bit as we are recording this episode.

But this is actually a kind of boring topic, if you will, and this centers around water and you might be asking, well, how do I invest in water and what's all this about? So with that, I'm just going to pass it on to Riggs to do his introduction and tell us how we can invest in this asset class. So, Riggs, welcome to the show.

Riggs: Thank you, John. Right now, we have a situation where runaway inflation, Jamie Dimon claiming that we're going to have a hurricane. And I think another person I read today says it's a storm on top of the storm. So we have a lot of situations. And essentially what we're looking at is a macro change from currency based finance to commodity based finance.

John: Okay.

Riggs: So he who has a commodity is basically is in good shape, which is going to be a tremendous realignment for all of a sudden, Gabon is going to be a very powerful country because they have, I don't know, lithium or whatever. In other words, countries that didn't have good currencies but have good commodities all of a sudden matter. And so that means in general and there is, there's basically in an inflationary situation, the only safe ground is not risk assets, but hard assets and hard assets that earn residuals.

So you want to make money from your, gold is great. But, you know, I've got gold in my safe. So what? Right. So you want assets that produce and are yet not likely to lose value because of sentiment or markets. Real estate is, for example, is a great asset, but it's there's a lot of value add from the markets perspective. How much realization does a commercial mall have right or things like that? And of course, we've seen how that can go south.

So you want to look at an asset that is that is solid and can get make money. And then you say, well, what about oil? Or the problem with oil and gas is that it's highly political. In fact, money is investments being withheld from the oil, the oil patch, because investors are not very comfortable with the politics involved. Like, you know what, they could make us close our wells any day now. Yeah, right. So oil is very fat right now, but it's politically risky, you know.

Gold and precious minerals, yeah, ok. Lumber was great, but now it's fallen apart because finally the housing boom has tapered off and the price of lumber has fallen off a cliff. So these are all assets that the reason why they're difficult now is because they've been around for so long and they kind of at their top. And so just like the price of Apple stock, there's a time when it comes down again.

John: Yeah.

Riggs: Now, water has never been an investible asset. And the reason is it has been centralized because the government will take care of you, we'll build these big central plants and we'll handle everything.

John: Yeah,

Riggs: That contract has fallen apart. Increasingly, businesses are being told, treat your own water. We can't, we can't take your, for example, breweries, which have a lot of effluent, very low, they're not toxic effluent, but is a lot of it. Typically they have a big problem because when they expand, they start overwhelming local municipalities. Municipalities say no. And one particular brewery started having to truck its effluent to another county.

John: Oh geez.

Riggs: And so then they're stuck with, oh, we're just gonna have to treat our own water because the cities are saying You can only give us treated water. Now, this is not a problem that consumers are aware of because frankly, the cities have not, they can't stop taking care of what's being, your flushing down your toilet and they're going to have to take it. So there's a minimum level of service that the consumer is being served with. Not well.

John: Yeah,

Riggs: I mean, water into my house. I have to filter it, you know that. But nonetheless, there's a breakdown of central infrastructure because it's overwhelmed. And what makes it worse is that there's a been a big migration last two years. It's, the numbers just came out. You know, New York lost, I think $20 Billion worth of taxable income last year from migration. So a lot of migration to secondary cities and which is good and it's healthy because it kind of redistributes everything.

But that's, you know, you move to a place like Clearwater, Florida. They're not geared up for a massive influx. They're accustomed to a certain level of water treatment. And so you overburdening rural, semi-rural, exurbia type locations, all of this adds up to a perfect storm for water and an opportunity for private water treatment.

Now, what I mean by that is helping businesses and industry and agriculture cope with the problem of treating their own water, which is a growing problem. And these businesses also learn that it's a way for them to limit water rate increases which are inflating. In over a ten year period they end up three times core inflation. So that's not great. So that's a good risk management for the business all. So they can recycle, therefore use the water they paid for more than once in a brewery, that means, for example, that even just using it for wash downs, the steam vessels, you can reuse about 50% of the water in your own plant without even making beer from it. Because not everyone is going to love beer made from effluent.

John: Yeah, exactly.

Riggs: Not that it's bad, but...

John: Maybe like the 10th beer. They won't notice it or something.

Riggs: But it depends on the beer. Right. Sometimes, you might get approval. But anyway.

John: True that.

Riggs: Yeah, that organic thing I can taste in the background. But anyway, so it's a good proposition for businesses. But here's the problem. I've got a brewery, I make beer, I invest in brewing vessels and all that stuff. I don't have capital for water treatment. That's not my business. So where is that million dollars going to come from? I got to go to the SBA, this, that and as a result, this kind of we learned this because we've built a business around serving those people.

But we noticed in early 2020 there was a tremendous backlog of unfunded prospective jobs, more than $45 million worth of jobs just stacked up there. And like what is going on? And because it was COVID. COVID was great for like taking a look at everything a second time, like, okay, let's look at our business model. Yeah. And we went, you know what? We've got to do something. And we figured out, well, why not help with the finance, right?

And so fast forward to late 2021, we had built a fintech that basically closed the loop and said, "Look, you're a brewery sign here, you'll get your water system fully maintained, its water as a service, paid by the gallon, just like you're used to from the city. It's a full, fully turnkey solution. You know, a box will show up in your brewery and put it in the corner and you'll be fine."

And that we called Water on Demand. That's our program. And first time investors can invest in a water system the same way they can invest in an oil well, i.e. buy. Well, there's this thing called, many of your listeners know about master limited partnerships in oil. That's been around since 1981, today it's the $300 billion market, about 60 of these MLPs. And what they are is a basket of properties, mostly pipelines, but also oil and gas. And because they're a basket, there's a certain amount of risk management. As long as you don't do that, that that mortgage, subprime.

John: The messy stuff.

Riggs: If you if you steward it right, then you've got a package of good properties. And if one fails or one gets closed. So what? And so we did the same thing. We built these Water on Demand units and we've been accumulating capital in those with the idea of, okay, now we're going to devote that capital. And because the machines remain, remember, remember only selling the service, therefore remain owned by us. They're not leased. They are deployed on a use basis. Therefore the asset remains with us, which gives the investor some security. It becomes an asset.

John: Okay,

Riggs: So you've got treated water and our investors get 25% of the net profits from this pay per gallon model and it papers out beautifully. And we've done the numbers and it generally, and you know, this services are generally more profitable than product sales. Yeah. You know Microsoft learned that with Office and you know, I pay $19.95 a month whatever it is for Microsoft Office is much more than I would pay for what I used to pay for it.

But I get much better service, you know, all the updates and I got the cloud, I got this, I got that. It's basically they are my little IT department. In fact we don't even, what IT department we don't even bother, we just, Microsoft does such a great job for that $20 a month that it's well worth it.

And that's how basically any kind of service pays off, both for the service provider and for the user because it takes the whole problem off the plate. Thank you very much. And if if the water is not not clean to a certain standard, I don't pay it. All right.

So what we've done is we've basically taken water, this Water on Demand and started to ramp it up and we've actually begun to already roll it out as its own company. It's going to get crowdfunded ultimately onto the Nasdaq, OriginClear being the mothership. And in fact, in the middle of all this, OriginClear made a transition from being a company that was trying to bulk up with more and more and more value. In the end, we started being like The Sound of Music to many kids, and one of them gets neglected, right?

So now the new model is take all those valuable properties and launch them using proven crowdfunding techniques. And that's been done amazingly successfully. So not only is Water on Demand set up as a pure play that, and here's the beauty of it. Water as an Asset™ has not hit a top. It hasn't been anywhere. It's the beginning of water as an asset. Nowhere in the world can you invest in water as an asset. This is a first.

John: Okay. As far as you had mentioned, like obviously the investors in the company, it's a pay for use or pay for the gallon and the box, if you will. Like you said, it's kind of in a corner there, I'm assuming, since the ownership is still retained by the company and then ultimately the investors, there's probably some like depreciation or maybe K1 schedules that can get some tax savings as well for investors or how does that work?

Riggs: Well, the short answer is no. And the reason why is, is we started doing that in 2020. We're like, okay, let's John can own a brewery system in Folsom, California. The problem with that is that there's a spider's web of regulation around investing in hard assets in this country. And so it's very hard it's easier for people to invest in a basket of these assets. What we do instead of delivering the K1 or tax benefits, depreciation, all that good stuff, is we reward the investors with equity.

John: Okay,

Riggs: First of all, piece of Water on Demand itself. So the first 10% of Water on Demand anti-dilutive is being handed out to the first $20 million raised. We've already raised almost three, so let's say $17 million to go that investors will get 10% of that. And then after the first 20 million that's over and in addition, they get equity in OriginClear, the mother company, 150% of their investment plus double warrants. So we've chosen to be very, very... Since OriginClear gets all the benefits.

John: Sure.

Riggs: We give you a chunk of OriginClear, basically.

John: Gotcha. Okay.

Riggs: So, you know, let's compare, for example, the cell phones right now, cell phone tower investments are great, but all you got was, you got the stock play, right? So unless you were a cell phone tower, you own the underlying land and you made money from the lease or whatever. You were a pure investor in a cell phone tower business. You played the stock. Well, here we have a chance to get a residual asset that you can enforce the UCC to get that residual and stock and warrants for the upside. So it's a great hybrid.

John: Okay. Interesting. Just kind of looking over here, Riggs, as far as from when OriginClear started to now, has there been like any kind of metrics you can give us like when you started as far as like the pay per usage? I don't know. Businesses were paying 2019, there was whatever, 1 million gallons of usage a month or whatever a number is, and that's grown like 25% a year. Or is there been like 500 boxes going out year one and that went up to 1000 boxes? Or what is the growth or metrics been looking like for investors that are interested in this?

Riggs: Well, what we've pioneered is the, we have a division called Modular Water Systems which we build from scratch in 2018. And right now it's running about a million and a half dollars a month in sales run rate. And it is that is patented technology for these Water Systems in a Box™, which is what you want, A. Because you can repossess them. they're not like concrete in the ground and B. They're in the corner right? They're not obtrusive and they're like plug and play.

So what we've done is we've built that business on a conventional basis. There's four initials you should know in the water industry DBOO — design, build, own, operate. And so what we've been doing is design and build. And last year our sales tripled in design and build. So we've had a big expansion in that area. But the problem with that is that your sales, you know, water systems is like real estate. It takes a while to get it built.

John: Sure.

Riggs: For example, in the middle of summer last year, we made a big $5 million sale to a power company. Well, that $5 Million sale is going to take two years to deliver over time. And that's only then can you count the revenue.

John: Okay.

Riggs: On the generally accepted accounting principles, revenues recognized only when you deliver milestones, right? And so you make the sale. Great. Got the money in part of it and you keep getting paid. So for example, we tripled our sales last year, but the revenue number stayed flat. Now it started the wave started to break.

So. Q1, we had a 50% increase in our recognized revenue and it's growing so that, that buffer effect is going to catch up. So our conventional business DB is very good now. We're now stepping into OO, own and operate, to make this water as a service work. So we're building that.

This is what our investors are paying for is the development of this new business. So what we can say is, "Look, we have a great reputation building systems. We really know how to do that." Now we're stepping into the finance game and obviously we have to, we have been recruiting some outstanding finance people, world class finance people to run that. And it's a challenge. But frankly, it's harder to make to build a water business than it is to build a contract management business, frankly.

John: Okay.

Riggs: So basically we're talking about here is Water on Demand sits at the intersection of the client and the builder, because one of the decisions we made was sure we've got a growing business over here in design and build. But, we're going to raise money far faster than we could ever build those systems. We're going to quickly overwhelm our resources in Texas and Virginia. These are the current operating centers.

So what we decided is, look, Water on Demand is going to always, let's say you are in Atlanta, Georgia, you've got a housing development. It's off the grid you want to connect it to. You don't want to connect it because it's $5 million. Instead, you want to just put in a self maintaining black water system. So we go ahead and we say, okay, we'll finance that, and we find a local regional water company to build it and maintain it so the person is showing up to maintain it.

We don't have to fly somebody out from Texas. We use local resources. And so what we've decided to do is give up, and this is a huge departure from the rest of the industry that tends to want those hardware sales, right?

John: Sure.

Riggs: No. We're going to go ahead and give them away to local players. Now, what does that do? That's kind of like our supercharger network, right? In other words, all over America, people will have alliances with us who are getting bluebirds. Whoa, we just got a job from OriginClear, fully funded, to build a system and maintain it. We didn't have to sell it. And furthermore, they are a source of deal flow.

I was talking to one of my longtime partners in California and I told them our new business model. And and he said, listen, I've got a golf course in San Diego that is ready to go, but they don't have the 3 to $4 million to make it happen. Can you do it? I'm like, Yeah. Okay. So it's a source of of business, of deal flow. And it's also a way to get those things delivered. So now we can run massive parallelism. We can have multiple projects going. We're financing, financing, financing, financing. And we have certified partners on the ground building and delivering, and we license our Modular Water technology to them. And that standardizes the fleet.

John: Okay.

Riggs: Beautiful thing, because now we get licensing revenue to our division Modular Water. It's all synergistic.

John: Okay. So in many ways, I guess how I hear that's kind of like a franchise model where you go to one McDonald's in some place and go to another McDonald's. You know, it's the same product, the same standard, shall we say, from one McDonald's to another. There isn't a variance and that's kind of where the licensing almost like a franchise comes in to make sure that they're all the same, so to speak?

Riggs: Yes. I mean, obviously, it's not a literally a franchise because.

John: Yeah, I was just trying to.

Riggs: But you're absolutely right. These are, these have integrated, they're basically integrators of your technology and they're granted a license for that, specifically. This gets, because again, here's the problem with water or any other industry. One company cannot transform the entire industry. It takes a long time. I can think of one that has which is Tesla, an amazing example. But I think Elon is you know, I love people who say Tesla is going to go bankrupt. I'm like, yeah, you go ahead and bet on that.

Good luck, right? But in general, what you want is you want a group, you want a you want a movement. So rather than us trying to sort of finance and build everything and we sort of stay in our lane and then everybody else steals our model, instead we go, No, we'll be finance and we'll, we'll be basically the MLP, right? Because MLPs don't do their own drilling or pipeline building, they just bundle the packages. Right?

And so if we just manage the MLPs, then we will be the investment market for water as an asset. And this water will be paid, every single gallon paid for, which by the way, takes us down the road eventually to being able to tokenize that water.

John: Okay.

Riggs: In 2018, I tried to start a crypto in water called WaterChain. But the problem we ran into was there's no standardized way of pricing water. It's all over the place.

John: Sure.

Riggs: And as a result, there's no, there's no water market. But once you've got water being paid for by the gallon, now you've got a standardized price. And eventually you can start having tokenization, you can start having transferability of assets. I decided to move my digital bond, my Water on Demand bond over to you, because it's tokenized, I'm like, I just do a little address change done and hopefully you weren't a thief. And then yeah, but putting aside the horrible track record we have from crypto transfers, still it's very efficient thing.

Now where we want to go is we want to then build more Water on Demand hubs in financial centers; Singapore, Dubai, London, Tokyo, that then fund water systems for their area. And we prefer to have a financial network than to have a water equipment network that we built. Now, here's what's cool. We actually have a water company because we own the machines that were built by someone else and we own the contracts with the clients. That kind of puts us in the driver's seat.

John: All right. Well, thanks again, Riggs, for coming on. It was a pleasure to have you on the show.

Riggs: Thank you, John. I enjoyed it myself. And you have a great rest of week.

John: You as well. Thank you.

End of presentation

 

Ken and Riggs


Freewheeling Discussion

Riggs: You know, I like to play this podcast because it's a chance for me to sort of answer questions and live as opposed to sort of sitting here pitching them to you blank. So that's super cool. So with that in mind, I am now going to call on the inimitable Ken Berenger for the freewheeling discussion.

Ken: Good afternoon. Good evening.

Riggs: Good evening, sir. It's still afternoon in LA.

Ken: Yeah, it's like lunchtime, right, isn't it?

 

Ivan Evangelizing

Riggs: Wasn't that cool. And by the way, I wanted to say this. Our good friend Ivan Anz is actually traveling America right now. He spoke about OriginClear and water on demand at the high net worth individual mastermind in Nashville. He was on Entrepreneurs on Fire, which is the number one business podcast in the world. They have 3 million listens per month.

And also he was on the afterward, afterWARD podcast. And then this week he's going to be speaking at a high net worth individual event in Utah and also a mastermind in Sundance, as well as a PhilanthroInvestors® event in Denver. So he is very busily spreading the word about.

Ken: Evangelizing.

Riggs: We're so, we're so grateful for that.

 

They're Saying What We've Been Saying

Ken: So what's interesting is, is that now, with the recent near completion of an investment of one of the wealthier people in Europe into, we're working on that right now.

Riggs: That's a brag you've got to brag going on here.

Ken: No, I didn't do it. No, no. He called me. I had a minute.

Riggs: You said, Do you know who I am?

Ken: He said, Do you know him? I said, Yes, sir. Yes, I do. No, What I what I mean is, is that. I think the world. So you and I joke about this, you know, we're sitting there texting at 1130 at night because nobody sleeps. And we talk about the serendipity of how the world. All of a sudden, it's almost infuriating because all of these publications and all of these people are coming out and they're literally repeating verbatim what we said three years ago. And people went, Huh? You know?

And you see that meme on Facebook, you have Leo DiCaprio, he's got the beer and he's he's pointing to the TV. You know, that's like me. I'm like, wait a minute. I said that. Know. So it's it's very no, look, don't get me wrong. Having really smart people that are completely outside of your sphere of influence validate what you've said. That's wonderful.

And I'm glad that I'm glad that circumstances, albeit they are a little dicey right now, have kind of forced the world to look at water as the true asset that it is, and to begin making references that, hey, invest in water, invest in water. And like you said, you could buy utility stocks. That was pretty much it. But people bought utilities for a reason. They paid incredible dividends. Why? Because there's a lot of money in power, in water delivery. Right.

 

Profitable for Centuries

So I tell investors, water has been this is not green technology that, you know, they know it's going to take another ten years to get really good at it. You know, these advocate investors are doing it, going they're holding their nose and they're going, I'm going to do it because I want to prevent, they're true good people, that I'm going to prevent human death in the future. I'm doing it for the right reason. I get that.

They don't have to hold their nose here. Water has been profitable for, what, centuries? Right. So it's very, very exciting. And I think that having Ivan speak to kind of the ultra high net worth crowd and what I did in London, we're now, we're now well received. The audience is keenly interested and looking at this kind of like, wow, you know, you know, look, a year ago, you could buy anything and you made money, you know.

Yesterday the market went up 500 points because they announced a 75 basis point increase. How does that happen? So in other words, it's you know, it's not throw a dart at the Wall Street Journal now and make money. So I think, like you said, it's no longer a currency market. It's a it's a commodity market. And I think there's no more valuable commodity in the world. And I think it's something that the time has really come.

 

Inflating Water and Sewer Rates

I do like the way, he was a good interview because his question truly conveyed the fact that he really he wasn't kind of pre coached on what you were doing because he was way off. He was way off. Right. And the fact that I thought it was a very clean way of explaining it to kind of, So what do you do? So how far along are you? You know, that was a very well done. Well done, Padowan. It was it was very well no, it was very well executed, in my opinion, because it was easy. It was uncomplicated the way you were.

Riggs: He's a smart guy. He knows business. And so he was taking it from that point of view is like, okay, what is this thing anyway? And so that's why it's valuable. And also, you know, we've been talking about this particular stat. This is that article about how buildings are being required to do the recycling. But the reason I wanted to bring this up here is that there is a quote right here, residential and you and I know this.

 

Water and Sewer rates


Water and sewer rates have outpaced inflation by nearly 300% over the last decade, while growing urban populations are straining aging municipal water infrastructure. How many times have we shouted this? And now this is like, Oh yeah, of course, sure. Oh, this is what's happening. I'm like.

Ken: We knew that. We knew that, you know, I know that.

 

First to Do it This Way

Riggs: Don't ever, don't ever expect to be thanked for being a prophet, just be positioned to profit from it. In fact, I had a text from a long standing friend and investor Paul Fetcher, and he goes, "What is your barrier to entry that prevents other water companies from entering the leased water systems market?" Well, of course, first, we don't compete with the leasing companies very, very important because that's highly commoditized.

So we're actually providing a use type, like the way you use software. But also the barrier to entry is this network of water companies that we plan to ally by giving them business and they give us business and it creates this what I like to call our supercharger network. Tesla, you know, you can drive across the country on a Tesla supercharger network. Try doing that with a Fiat electric car. It's not going to happen because you'll sit there for 14 hours on a slow charge, whereas Tessa's got it going down. It's not perfect, but at least they've established themselves as being very hard to be correct.

Ken: So. And another way I would approach Paul. Hi, Paul. Another way I would house things in Long Beach. The other way I would approach. The answer is, well, the barrier, the really the barrier to and first of all, being first, there is a tremendous, tremendous amount of power and and velocity from being first, right? And secondly, there are companies that do different aspects of what we do very, very, very well. No one has, everyone's come at it from the water business, right? So they did it in very limited kind of fits and starts.

I think the power of what we did is you and I are not in the water business. I was finance, you were high tech. And we said, okay, fintech. And when we were told, "Well, you can't do that." We go, "Why?" They go, "You know, I really don't have an answer for that. I guess you can do it." Right. But no one looked at it that way. So I think by by going after what you described as the big belly, right. The middle class, the Walmart. Right. Walmart is one of the biggest companies in the world. And they sell to people who are generally low to middle income people. They're not they're not Neiman Marcus. Right. There's eight gazillion Walmarts where there's only a handful of Neiman Marcus's right.

Riggs: Says by being first, we become the gold standards by which others are measured.

Ken: Brilliantly put. And I couldn't have said it better. And I think that and I've been asked that a lot, and I say, look, alacrity, there is a lot to be said for alacrity and to move quickly. But I think we're virtually at that point now where this is our established model and it would be easier for simply someone to join forces or acquire than to duplicate. The relationships that Dan and Marc have developed over the past two decades also are ubiquitous. Right. So there's that there's those tendrils that just reach out so it can be pulled together rather quickly now.

 

PWT 25th Anniversary

Riggs: By the way. This week is the 25th anniversary of Progressive Water Treatment. So we acquired them in 2015. In other words, seven years ago. But they'd already been in business for the full.

Ken: 18 Yeah. And I believe that his dad ran the business for years and years before that. So I mean that general business has been there for decades and decades. Sure. Well, happy thought.

Riggs: Yeah. It's a happy anniversary. Marc and Mike Jenkins and the whole team, they are truly amazing in McKinney, Texas. They are flat out. You go see that plant right now. It is. You can hardly walk through there. There's so much being built. It's ridiculous. We're very proud of them.

 

More Sophisticated

Ken: That's terrible news, right? I will say that when I used to try to describe this to investors a year ago, I really had to get into the weeds because they just didn't they didn't make the... Now, I have more and more people, especially, I think and look, I truly believe this is because we're dealing with much higher net worth individuals who are far more sophisticated in general. But they're finishing my sentences.

They're like, Oh, it's like an MLP.  Like before I get there, you know? So yeah. So, and I think and that's because you and I have had these discussions about how so many different philosophies actually repeat the same mantras and different, slightly different words. Because truth is, wisdom is wisdom. A good way of doing things is a good way of doing a thing, right?

Riggs: Oh, no, no. It's amateur's borrow, professionals steal. It's as simple as that.

 

FinTech & The Importance of Our Mission

Ken: Okay. Okay. We'll take it. But the reality is, is that this is it's not an accident that solar exploded in the last two years using fintech, deploying thousand dollar investors, the Reg A investor, pooling together thousands of investments in launching water systems, not water systems, listen to me. Power, power plants in Africa delivering a quality of life enhancement to the developing world. That same model, however, deployed into fintech for water, would literally bend the curve of the loss of human life in that same area of the world, which is an incalculable.

Riggs: But even in places like California, that's the shocking part. Look at the water quality issues, right?

Ken: It's not killing you now. Right. There's literally people dying like you hear about six, 6000 people and we know, and look we know that the cancers and the neurological disorders and the people dying. We know that it's very, very it's almost certainly environmental. Now, no one is ever going to fund a study to nail down the actual cause because of the liability attached to finding out it was the water.

Riggs: Well, you know, the problem, for example, in Midwest, with farmers coming down with brain cancer because of the roundup. These glioblastomas, these terrible brain cancers. And it's this thing that water permeates us. We are mostly water. And so we need to detox the world in a way.

Ken: So and that's exactly what we're doing, right? We're detoxing the world and that's a big, big job. So I will say one other thing. I think I the way you in a very clean way describe the fact that this is a massive job that no hundred people could ever pull off. Right. It has to be a network. It has to be fintech. It has to be just it's the money, stupid, because there are tens of thousands of companies out there with pipelines that they're stuck with because the guy keeps going, I need it, but I can't afford it. Remove that barrier, remove that pain point, and you literally open up the world for the type of treatment that it really needs.

 

Starting to Accelerate

Riggs: Yes. And in fact, the deal flow of evaluating these deals has dramatically increased. Manuel was going, oh, my God, oh, my God. Which is like, yes, great, perfect. So we are madly evaluating the deals. There'll be much more news on that. It's kind of like when those locomotives go choo choo choo choo.

Ken: They slide. The wheels were sliding at first you slide and then they start to catch. Right. We're at that point where it's starting to catch. Look, I commented to you the overwhelming response I'm getting from the investing public of people looking to, you know, that is a sign that well, first of all, I think the world is catching up, that, wow, this is a thing.

And I think if you you know, we're kind of finding, we're finding a way to communicate this in a way that isn't like, huh? You know what I mean? I think that was part of the I mean, look, we knew what we meant, right? You know, it was it took a little bit to kind of translate our language a little bit. But I think I think that that message is being conveyed very, very well. I can't wait to talk about in the next week or two. Hint, hint, hint about our next next phase.

Riggs: Which is why I was doing that big cliffhanger on that shareholder letter. So with that, I'm going to cliffhang. I hope that I can talk about it next week. This big thing.

Ken: And to the folks that call me this week, I am sworn to secrecy. Okay. You can you can put bamboo shoots up my nails, but I can't do anything until I can do it.

Riggs: Good John McCain.

Ken: So that's it.

Riggs: Listen, thank you, Ken. Thank you all for being here. Thanks to Ivan Anz for touring the American Midwest on our behalf. Thanks to all of our amazing shareholders. You guys and gals rock. And with that, I'm going to wrap it up for another wonderful CEO briefing. Have a good night.

Ken: Goodnight.

 

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